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WORKS  MANAGEMENT  LIBRARY 


EFFICIENCY 

AS  A  BASIS  FOR 

OPERATION  AND  WAGES 


BY 

HARRINGTON  EMERSON 


NEW  YORK 

THE  ENGINEERINCx  MAGAZINE 

1911 


Copyright,  1909 
By  JOHN  E.  DUNLAP 


CO 
CO 

en 


5  INTRODUCTION 

Works  management,  that  is,  the  process  of  direct- 
ing the  great  forces  of  manufacturing  to  the  best 
advantage  in  economy,  has  progressed  very  rapidly 
\jP  during  the  past  few  years  from  the  condition  of  a 
"0  scarcely   formulated  practice  to  that    of    a    rapidly 
jQ  materializing  science.     The  rate  of  progress  in  this 
j_  change   has  not   been   uniform.     As   usual   in   such 
""  phenomena,  it  has  been  marked  by  continuous  and 
rapid    acceleration,    notably    stimulated    at    certain 
g  points  by  the  publication  of  the  work  of  great  in- 
.  5;  vestigators,  thinkers,  or  practitioners  in  the  field.   An 
g  early  impetus  of  this  character  was  given  by  Mr.  H. 
'^  F.  L.  Orcutt's  papers  on  machine-shop  management 
_^  which  appeared  in    The    Engineering    Magazine    in 
'  1899.      Another    phase    was    inaugurated    by    Mr. 
g  Carpenter's  two  series  on  profit-making  management, 
(^  also  published  in  this  Magazine.    One  of  the  greatest 
^  of  all,  though  in  a  more  specialized  direction,  was 
*"  influenced  by  Mr.    F.    W.   Taylor's   deeply   scientific 
"^  analysis  of  the  times  of  operations,  followed  by  his 
world-famed  study  of  the  art  of  cutting  metals.    IMr. 
**  H.  L.  Gantt's  development  of  the  bonus  system,  and 
_^  Mr.   F.   A.   Halsey's   promulgation   of  the  premium 
Tt-^^lan,  marked  other  notable  epochs  in  the  growth  of 
^  the  new  applied   science.      Mr.    Emerson's   develop- 
ment of  the  efficiency  system  is  another  such  exten- 
sion, later,  but  perhaps  larger — large  enough  to  form 
the  basis  of  a  philosophy  and  hopeful  enough  to  have 
won  the  designation  of  "a  gospel." 

3 


288548 


4  INTRODUCTION 

The  methods  advocated  have  already  found  appli- 
cation in  some  of  the  largest  manufacturing  and 
operating  institutions  in  the  United  States.  This 
first  complete  demonstration  and  explanation  of 
them  appeared  originally  as  a  series  of  articles  in 
The  Etigineering  Magazine  from  July,  1908,  to 
March,  1909.  They  took  place  at  once  as  one  of  the 
classics  of  the  literature  of  Industrial  engineering, 
and  the  oontinued  demand  for  them  in  permanent 
form  has  more  than  confirmed  the  original  purpose 
held  by  the  author  and  The  Engineering  Magazine, 
to  republish  them  complete  in  a  single  volume.  They 
have  been  thoroughly  revised,  in  great  part  rewritten, 
and  much  amplified,  so  that  even  those  who  read 
them  as  they  appeared  from  month  to  month  will 
find  a  new  and  a  fuller  interest  in  the  chapters  of  the 
book.  The  Editor. 


PREFACE 

The  Spanish  island,  Guam,  was  a  closed  port  pre- 
vious to  1898.  No  foreign  or  merchant  vessel  was 
allowed  to  visit  it.  The  inhabitants  lived  happily 
and  lazily,  in  entire  forgetfulness  of  the  ten  com- 
mandments and  of  all  the  maxims  of  Poor  Richard. 
After  it  was  ceded  to  the  United  States,  Captain 
Leary  was  made  commandant  and  the  shiftless  hap- 
piness of  the  natives  vexed  liis  American  soul,  so 
among  other  reforms  he  ordained  clothes  and  work 
and  marriage,  and  forbade  cock-fighting,  gambling, 
and  promiscuity. 

Perhaps  never  before  were  men  and  women  in  a 
primitive  stage  of  social  and  industrial  evolution 
brought  so  suddenly  face  to  face  with  the  deepest 
modern  problems. 

The  Guamanese,  having  few  wants,  and  these  lav- 
ishly supplied  by  prodigal  Nature,  worked  little. 
Captain  Leary  voiced  the  spirit  of  American  activity 
by  determining  that  they  ought  to  work.  Assuming 
that  his  premise,  the  obligation  to  work,  is  correct, 
should  they  work  efficiently  for  themselves,  indi- 
vidually creating  advance  supplies  for  wants  here- 
after to  be  developed ;  should  they  work  for  them- 
selves collectively,  building  roads  and  planting  parks, 
erecting  pavilions,  learning  to  play  brass  bands,  etc. ; 
should  they  work  for  posterity,  building  docks  and 
public  edifices,  making  other  improvements,  valuable 
for  the  future  rather  than  for  the  present  genera- 

5 


6  PREFACE 

tion;  or  should  they  be  given  corvee  tasks,  as  are  the 
natives  of  Java  by  the  Dutch,  each  worker  under 
obligation  to  deliver  plantation,  forest,  and  sea 
fruits  at  an  arbitrary  low  value,  the  profit  being 
appropriated  by  those  more  intelligent  and  master- 
ful? Had  I  been  one  of  the  younger  and  progres- 
sive Guamanese,  I  should  have  been  willing  to  de- 
velop new  wants  and  been  willing  to  work  for  them, 
I  should  have  been  willing  to  work  a  little  for  the 
collective  interest,  I  should  have  been  willing  to 
work  a  little  for  posterity,  and  I  should  have  not 
minded  giving  part  of  the  proceeds  of  my  labor  to 
those  who  could  intelligently  organize  and  direct; 
but  I  should  have  objected  to  regulation  of  dress, 
amusement,  and  personal  habits. 

It  would  have  seemed  to  me  rational  that  whether 
I  worked  an  hour  a  day,  or  twelve  hours  a  day — 
whetlier,  according  to  individual  proclivity  I  worked 
for  myself,  for  the  community,  or  for  posterity,  that 
I  should  work  efficiently ;  but  if  I  worked  for  a  task 
master,  the  shorter  the  hours,  the  less  per  hour,  the 
more  inefficiently  I  worked,  the  better  for  me. 

In  a  civilized  country  the  problem  is  even  more 
simple  than  it  was  at  Guam.  With  exceptions  so 
few  as  not  to  count,  modern  workers  (as  also  wild 
animals)  work  for  themselves  and  their  immediate 
posterity.  Slave  labor  no  longer  exists;  labor  for 
the  community  is  no  longer  undertaken  for  moral 
and  emotional  rewards,  as  in  crusades  and  pilgrim- 
ages. We  have  no  Samurai  class,  men  who  were  no 
more  acquainted  with  money  than  a  modern  clubman 
with  a  shoemaker's  or  tailor's  tools.  We  have  no 
unpaid  House  of  Commons  and  House  of  Lords. 
Our  executives,  our  judiciary,  our  legislature,  our 
army  and  navy,  receive  salaries ;  our  physicians,  our 
lawyers,  our  clergymen  receive  fees.     There  is  every- 


PREFACE  7 

where  a  pecuniary  reward  for  the  time  and  service 
given. 

There  is  today  a  more  direct  connection  than  ever 
before  between  individual,  corporate,  and  national 
efficiency,  and  individual,  family,  and  social  well 
being,  and  this  is  the  inspiration  and  the  Justifica- 
tion of  these  essays. 

May,  1909.  Harrington  Emerson. 


CONTENTS 

Chapter  I.  Typical  Inefficiencies  and  Their  Sig- 
nificance 

The  Efficiency  of  National  Operations — Effi- 
ciency as  an  Engineering  Problem — The  Elimina- 
tion of  Waste — How  Progress  is  Secured — In- 
stances of  Common  Wastes — What  Really  Con- 
stitutes Waste — Examples  from  Industrial  Prac- 
tice— The  Benefits  Obtainable  by  the  Elimina- 
tion of  Waste — How  Industrial  Wastes  Are 
Corrected — Examples  from  Foundry  Practice — 
From  Machine-Shop  Practice — From  Railway- 
Shop  Practice — From  Railway  Operation — From 
Building    Constx'uction   13 

Chapter   II.     National    Efficiencies;   Their  Ten- 
dencies and  Influence 

Inefficiency  as  a  Form  of  Waste — What  Con- 
stitutes Individual  Efficiency — The  Problems 
Confronting  the  Economic  Engineer — National 
Prosperity  not  Dependent  on  Natural  Resources 
— Characteristic  Differences  between  the  Great 
Industrial  Nations — Causes  of  the  Industrial 
Prosperity  of  Great  Britain— Of  France — Of 
Germany — Of  Japan — Of  the  United  States — 
Question  of  National  Prosperity  in  the  Future__     31 

Chapter    III.     The    Strength    and    Weakness    of 
Existing  Systems  of  Organization 

The  Inefficiency  of  Government  Works — Com- 
parison with  Corporate  Undertakings — Large 
Corporations  vs.  Small — Line  Organization  and 
Staff  Organization — Their  Characteristics,  Func- 
tions, and  Results — Examples  of  Efficiency  Se- 
cured through  Staff  Organization — Demonstra- 
tions from  Military  History 5S 


10  CONTENTS 

Chapter  IV.     Line  and  Staff  Organization  in  In- 
orsTRiAL  Concerns 

How  the  Staff  Organization  Operates  in  Indus- 
try— As  to  Men — As  to  Equipment — As  to  Ma- 
terials— As  to  Metliods  and  Conditions — Economy 
Secured  in  Actual  Experience — Figures  of  Sav- 
ings Effected — Standards  and  Records 72 

Chapter  V.     Standards  ;   Their  Relations   to  Or- 
ganization AND  to  results 

Line  Organization  Essential  to  Perpetuation — 
What  It  Exacts— Relations  of  Staff  to  Line- 
Origin  and  Nature  of  Staff  Standards — Stand- 
ards Constantly  Progressive — Requisites  for  the 
Chief  of  Staff— Requisites  for  Staff  Juniors- 
Losses  Incurred  through  Lack  of  Staff  Co-opera- 
tion— Examples  from  Current  Affairs 88 

Chapter  VI.     The  Realization   of   Standards   in 
Practice 

Exhaustion  of  Natural  Resources  Makes  Bet- 
terment of  Efficiency  Imperative — The  Solution 
Not  Less  Line  Organization,  but  More  Supple- 
mentary Staff— Necessities  Discovered  in  Reor- 
ganization of  American  Shops — Difficulties  of 
the  Task — A  Specific  Case  Discussed — Conditions 
Found  in  the  Shop — Methods  Auopted  for  Im- 
provement— Results  Secured — The  Effect  on 
Costs  Tabulated — Expense  of  the  Woi'k  and 
Savings  Effected — Efficiency  Methods  Applied  to 
Various  Items  of  Cost — Graphic   Illustrations-.  Ill 

Chapter  VII.     The  Modern  Theory   of   Cost  Ac- 
counting 

Two  Methods  of  Ascertaining  Costs — Determ- 
ination After  Work  Is  Completed  or  Before  Work 
Is  Undertaken — Objections  to  the  First  Method — ■ 
Advantages  of  the  Second  Method — How  Prede- 
termined Costs  Are  Found — Illustrations  from 
Practice — The  Functions  of  the  Efficiency  Engi- 
neer— His  Relations  to  the  Auditor — Their  Co- 
operation in  Cost  Reduction  Explained — Low 
Costs  not  Necessarily  Indicative  of  High  Effi- 
ciency, or  Vice  Versa — Why  This  Is  So — The 
Methods  of  the  Efficiency  Engineer 133 


CONTETSTTS  11 

Chapter  VIII.     The  Location  and  Elimination  ok 
Wastes 

Determination  of  Total  Expenses.  Standard  or 
Efficiency  Costs,  and  Current  Wastes — The  Dif- 
ference between  Predetermined  Costs  and  Actual 
Expenses — How  the  Efficiency  Engineer  Proceeds 
— A  Concrete  Example  from  Railway  Practice — 
Methods  Used  and  Savings  Effected — Finan- 
cial Possibilities  of  the  Adoption  of  Efficiency 
Methods — Inefficiency  of  Government  Work 157 

Chapter  IX.  The  Efficiency  System  in  Operation 
The  Costs  of  Any  Operation  Analyzed — Rela- 
tions of  Material,  Labor,  Equipment,  and  Indi- 
rect Expense — The  Material  Requisition^Gen- 
eral  Form  Recommended — Its  Use  in  Practice — 
The  Service  Requisition — Form  Recommended — 
Its  Use  In  Practice — Cost  Accounting — How  Ma- 
terial and  Service  Requisitions  Serve  All  Cost- 
Accounting  Purposes  176 

Chapter  X.    Standard  Times  and  Bonus 

Efficiency  as  Determined  in  Practice — A  Typi- 
cal Shop  Efficiency  Record — The  Bonus  Paid  for 
Efficiency — Bonus  Table — The  Effect  on  Produc- 
tive Workmen — On  Foremtm  and  Superintend- 
ents— The  "Individual  Effort"  System  of  Wage 
Payment — Experience  on  a  Large  Scale 101 

Chapter  XI.     What  the  Efficiency  System   May 
Accomplish 

How  Efficiency  is  to  Be  Attained— The  Proper 
Relation  of  State  to  Corporate  and  Individual 
Undertakings — The  State  as  a  Staff  Guide  and 
Regulator — How  State  Functions  Might  Stimu- 
late Industrial  Efficiency — Contrast  with  Present 
Conditions — The  Possibilities  of  the  Future 204 

Chapter  XII.    The  Gospel  of  Efficiency 

Groundless  Fears  of  Decreased  Employment — 
Examples  from  Recent  Experience — How  High 
Efficiency  Carried  Certain  Industrial  Concerns 
S;ifely  through  Industrial  Depression — Efficient 
xVork  not  Burdensome — A  Contrast  of  Old  Con- 
ditions with  New   217 


EFFICIENCY  AS  A  BASIS    FOR  OPER- 
ATION  AND  WAGES 

Chapter  I 

TYPICAL    INEFFrCTEXCTES    AXD    THEIE 
SIGNIFICAXCE 

XJATUBE'S  operations  are  cliaraeter- 
-^^  ized  by  marvelous  efficiency  and  by 
lavish  prodigality.  Man  is  a  child  of  Nature 
as  to  prodigality,  but  not  as  to  efficiency.  If 
it  had  happened  the  other  way — if  he  had  fol- 
lowed Nature's  lead  as  to  efficiency,  but  had 
taken  up  parsimony  as  a  distinctly  human 
virtue — the  human  race  would  have  been 
wealthy  beyond  conception. 

Most  political  economists  have  preached 
parsimony,  not  efficiency.  As  parsimony  is 
not  one  of  Nature's  teachings  and  as  effi- 
ciency is,  it  would  be  better  to  aim  at  efficien- 
cy first  and  leave  parsimony  to  the  genera- 
13 


11  EFFICIENCY  AS  A  BASIS  FOR  OPERATION 

tions  to  follow,  wlio  will  be  forced  to  make  a 
virtue  of  necessity. 

The  efficiency  of  Nature's  operations  is 
seen  on  every  side. 

There  is  Nature's  i3ump,  which  draws  up 
the  water  from  the  surface  of  the  ocean  to  a 
vast  height,  carries  it  thousands  of  miles,  and 
deposits  it  on  mountain  tops  and  over  plains. 
No  reciprocating  parts,  no  valve  slip,  no  lost 
motion,  no  frictional  resistance,  no  pipe  lines. 
Prodigal  in  the  amount  of  water  sucked  up, 
prodigal  in  the  height  to  which  it  is  lifted, 
prodigal  as  to  distance  transported,  the  oper- 
ation shows  the  100  per  cent  efficiency  of  a 
perfect  heat  cycle. 

There  is  Nature's  storage  battery  in  mus- 
cular reserve.  A  salmon  will  enter  the 
Rhine  from  the  sea,  cease  feeding  after  en- 
tering fresh  water;  he  will  swim  up-stream 
500  miles,  in  exceptional  cases  stay  at  the 
headwaters  for  17  months,  and  then,  not  hav- 
ing lost  much  weight,  will  swim  to  sea  again. 

An  oil  engine  may  reach  30  per  cent  ther- 
mal efficiency,  but  the  salmon,  assuming  his 
whole  weight  to  be  pure  oil,  without  consum- 
ing it,  uses  up  several  times  more  energy 
than  is  yielded  l)y  an  equal  weight  of  oil  in 
combustion. 


TYPICAL    INEFFICIENCIES  15 

The  salmon  uses  atomic,  not  thermal, 
energy. 

The  firefly,  the  glowworm,  the  phosphor- 
escent jelly-fish,  show  a  far  higher  light  effi- 
ciency than  has  ever  been  reached  even  by 
vacuum  lamps. 

A  heavier-than-air  flight  has  very  recently 
been  attained  by  man;  but  most  of  Nature's 
visible  creatures,  from  the  midge  to  the  heavy 
swan,  revel  in  mechanical  flight.  From  swans 
to  humming  birds,  innumerable  feathered 
creatures  fly  every  spring  from  the  tropics 
to  the  Arctic  circle,  every  autumn  from  Arctic 
circle  back  to  tropics,  while  some  of  them  fly 
from  Arctic  to  Antarctic. 

To  attain  the  high  efficiency  of  the  atomic 
energy  of  the  fish,  the  high  mechanical  effi- 
ciency of  the  bird,  the  high  lighting  efficiency 
of  the  firefly,  is  not  an  ethical  or  financial  or 
social  problem,  but  an  engineering  problem; 
and  to  the  engineering  profession,  rather 
than  to  any  other,  must  we  look  for  salvation 
from  our  distinctly  human  ills,  so  grievously 
and  pathetically  great. 

Inefficiency,  principally  of  administration, 
is  alone  responsible  for  the  long  bread  line  of 
able-bodied  men  which  continuously  for  near- 
ly two  years  has  disgraced  New  York  Citv. 


16  EFFICIENCY  AS  A  BASIS  FOR  OPERATION 

Inefficiency,  principally  of  administration,  is 
alone  responsible  for  the  700  starving  chil- 
dren fed  at  the  East  Side  schools  in  New 
York. 

For  every  mouth  that  comes  into  the  world 
there  are  two  hands,  two  feet ;  and  if  each  set 
of  hands  and  feet  does  not  have  an  organiz- 
ing brain  to  direct  it,  there  are  occasionally 
great  creative  and  organizing  minds  whose 
province  is  to  forestall  bread  lines  and  in- 
fant starvation  by  wisely  directing  willing 
hands  and  feet  but  weak  heads. 

When  one  considers  such  products  of  mod- 
ern engineering  knowledge  and  skill  as  an 
ocean  steamer,  the  perfection  of  design,  the 
perfection  of  machinery,  the  perfection  of 
line  and  staff  organization ;  or  when  one  con- 
siders a  modern  New  York  office  building, 
the  Hudson  Terminal  for  instance,  where  one 
finds,  without  any  futile  or  inept  talk,  discus- 
sion, or  legislation,  a  harmonious  and  smooth- 
working  combination  and  aggregation  of  in- 
tense individualism,  intense  socialism,  in- 
tense communism — and  even  intense  anarchy, 
since  all  the  tenants  come  and  go  as  they 
please — one  realizes  that  it  is  to  engineering- 
knowledge  and  practice  one  must  look  for  re- 
demption from  existing  evils.    Men,  women 


TYPICAL    IXEFFICIENCIES  17 

and  children  starve,  not  because  tliere  is  not 
abundance  and  plenty,  not  because  the  few 
have  appropriated  the  portion  of  the  many, 
but  because  there  is  unnecessary  waste.  The 
actual  and  potential  wastes  in  each  year 
amount  to  as  much  as  the  total  accumulations 
of  wealth,  and  if  all  the  possessors  of  ac- 
cumulations were  left  in  undisturbed  pos- 
session, and  the  wastes  of  current  pro- 
duction and  use  eliminated  and  the  gain 
equitably  apportioned  according  to  meed  and 
deed,  no  woman  or  child  would  need  to  do 
mill  or  factory,  store  or  office  work,  no  super- 
annuated man  or  woman  need  toil,  no  young- 
man  need  delay  marriage,  nor  any  head  of  a 
family  be  torn  by  anxiety  as  to  the  feeding, 
the  clothing,  or  the  housing  of  his  depend- 
ents. 

It  is  distinctly  the  business  of  the  engineer 
to  lessen  waste — wastes  of  material,  wastes 
of  friction,  wastes  of  design,  wastes  of  effort, 
wastes  due  to  crude  organization  and  admin- 
istration— in  a  word,  wastes  due  to  ineffi- 
ciency. The  field  is  the  largest  and  richest  to 
which  any  worker  was  ever  turned. 

Progress — absolute,  not  temporary  and 
time-serving — will  be  made  slowly  or  i^pidly, 
as  ideals  and  standards  ar-e  low  or  high. 


18  EFFICIENCY  AS  A  BASIS  FOR  OPERATION" 

The  field  is  large  and  rich  because  so  little 
is  being  done,  because  there  is  so  much  to  do. 

Very  few,  outside  of  those  who  have  made 
special  investigations,  realize  how  very  low 
the  average  efficiency  of  endeavor  is,  even  in 
a  highly  civilized  country  like  the  United 
States.  Ever\^where  we  see  brilliant  results ; 
rarely  can  anyone  follow  the  losses  between 
result  and  initial  supply. 

A  filament,  enclosed  in  a  glass  bulb,  is 
heated  to  incandescence  by  an  electric  cur- 
rent and  we  use  the  glow  for  illumination.  It 
takes  a  definite  voltage  and  a  certain  num- 
ber of  amperes  to  heat  a  given  filament  to  and 
keep  it  at  the  required  brilliancy.  There  is 
frictional  loss  between  lamp  and  dynamo, 
loss  in  the  d\Tiamo,  losses  in  the  steam  en- 
gine driving  the  dynamo,  losses  in  the  boiler, 
in  the  furnace,  in  the  transportation  and  min- 
ing of  the  coal. 

Man  wastes  three-quarters  of  the  coal  in 
the  ground,  brings  the  remaining  quarter  to 
the  surface  by  inefficient  labor  and  appliances, 
doubles,  trebles,  or  quadruples  its  cost  by 
transportation  charges  to  furnace  door. 
Earely  is  as  much  as  10  per  cent  of  the  en- 
ergy of  the  coal  transformed  into  electrical 
energy,  and  of  this  only  5  per  cent  can  ap- 


TYPICAL    INEFFICIENCIES  19 

pear  as  light.  Ten  to  twenty  times  as  much 
light  is  provided  as  necessary  on  a  writing 
table,  because  of  the  distance  of  the  bulbs 
from  the  place  where  the  light  is  needed. 
The  light  itself  glows  continuously,  not  only 
during  intermittent  work,  but  often  several 
hours  before  and  after  it  is  needed.  Out  of 
ten  thousand  B.  t.  u.  in  the  coal  mine  we  use 
in  necessary  light  the  equivalent  of  about 
six. 

The  firefly  converts  the  hydrocarbons  of 
its  food  into  light  with  an  efficiency  of  40 
per  cent.  It  flashes  its  light  at  intervals, 
thus  making  it  most  effective  by  contrast 
with  the  surrounding  darkness,  and  it  emits 
no  more  light  than  is  necessary  for  its  pur- 
pose. 

In  production  the  firefly  is  about  seven 
hundred  and  fifty  times  as  efficient,  in  vol- 
ume use  ten  times  as  economical,  in  time  use 
twice  as  economical.  The  firefly  is  fifteen 
thousand  times  as  efficient  as  his  human  rival. 

If  any  human  activity  is  followed  out  from 
initial  reservoirs  to  final  attainments,  a  sim- 
ilar sequence  of  losses  will  be  found — losses 
gauged  not  by  any  ideal  or  unattainable 
standard,  but  by  what  is  being  continuously 
accomplished  all  around  us.     Even  if,  as  yet, 


20  EFFICIENCY  AS  A  BASIS  FOR  OPERATION 

some  of  the  liigii  efficiencies  seen  in  Nature 
are  beyond  reach,  it  is  a  greater  reason  for 
eliminating  those  wastes  which  are  avoidable 
and  which  are  primarily  responsible  for  the 
starvation  of  men,  women  and  children. 

Not  only  are  occurring  wastes  more  fla- 
grant than  is  generally  admitted,  but  it  is 
also  not  realized  that  very  hard  and  extreme- 
ly exhausting  work  is  not  an  evidence  of  effi- 
ciency. 

The  firefly  works  comfortably;  the  miner 
and  furnace  stoker  do  not.  Recently  on  the 
first  of  the  hot  summer  days,  on  the  charg- 
ing floor  of  an  iron  foundry  in  the  middle 
West,  in  a  foundry  far-famed  for  its  ad- 
vanced methods,  three  men,  weary,  haggard, 
worn  to  the  limit  of  human  endurance,  were 
throwing  the  pig,  scrap  and  coke  into  the 
cupola;  yet  in  spite  of  their  exertions  they 
were  working  with  only  33  per  cent  efficiency. 
At  another  foundry  two  men,  with  less  fa- 
tigue and  effort,  charge  regularly  a  cupola 
twice  as  large.  What  caused  the  67  per  cent 
drop  in  efficiency  of  the  three  men?  The 
tracks  for  the  cars  bringing  up  the  supplies 
of  pig,  scrap  and  coke  were  so  located  as  to 
the  single  cupola  door  that  three  men  were 
necessary  to  handle  the  materials,  pig,  scrap, 


TYPICAL    INEFFICIENCIES  SI 

coke.  One  lifted  a  pig  from  the  car,  passed 
it  to  his  companion,  who  swung  it  to  the  third 
man,  who  threw  it  into  the  cupola.  This  had 
been  going  on  for  twenty  years.  At  the  other- 
foundry  there  were  two  cupola  doors;  the 
car  came  up  so  that  each  man  unloaded,  with 
minimum  of  effort,  directly  from  car  into 
cupola. 

That  men  should  work  very  hard  for  9  or 
10  hours  per  day  is  not  a  hardship  if  they 
are  interested  in  their  work,  or  if,  in  the 
larger  interest  of  the  community,  they  work 
efficiently;  but  to  work  desperately  hard  for 
many  hours  at  dirty,  hot  and  rough  work,  yet 
waste  67  per  cent  of  the  time  and  effort,  is 
unpardonable.  What  could  have  resulted 
from  an  elimination  of  this  waste?  ^ 

1. — The  product  could  have  been  cheap- 
ened. 

2. — The  men  could  have  worked  one-third 
the  time  and  have  accomplished  as  much. 

3. — One  man  could  have  done  all  the  work 
and  have  earned  three  times  as  much. 

The  benefits  should  however  be  distrib- 
uted in  all  three  directions.  Fewer  men 
should  work  less  hard,  receive  higher  wages, 
and  deliver  a  cheaper  product. 

The  inefficiency  on  the  charging  floor  per- 


<<  EFFICIENCY  AS  A  BASIS  FOR  OPERATIOX 

vaded  the  whole  of  this  foundry,  although  it 
stands  exceedingly  high  in  its  class.  The 
jnoof  of  the  general  inefficiencj"  is  evidenced 
by  the  fact  that  the  other  foundry  turns  out 
its  finished  castings  for  less  than  half  as  much 
per  100  pounds,  labor,  materials,  overhead 
charges  included. 

It  is  not  because  men  do  not  work  hard, 
but  because  they  are  poorly  directed  and 
work  under  adverse  conditions,  that  their  effi- 
ciency is  low. 

At  a  southern  foundry  the  work  of  unload- 
ing pig  iron  from  box  cars  was  done  by 
negroes.  The  current  wage  rate  was  $0.16 
per  hour,  the  performance  about  2  tons  per 
hour  per  man.  It  was  resolved  by  the  man- 
agement to  increase  the  speed  of  work,  to 
lessen  its  cost,  and  to  add  to  the  earning 
power  of  the  laborers.  Conditions  were 
standardized,  so  that  each  worker  could  un- 
load directly  from  car  to  pile.  The  speed  of 
work  was  standardized  at  7  tons  an  hour. 
The  average  distance  each  pig  had  to  be 
moved  was  less  than  10  feet,  the  total  hori- 
zontal load  movement  140,000  pound  feet,  or 
26  pounds  one  mile  in  one  hour.  To  lift  14,- 
000  pounds  §  feet  vertically  in  one  hour  re- 
quires 1-47  part  of  a  horse  power.    Analyzed 


TYPICAL    INEFFICIENCIES  23 

in  this  way,  the  task  appears  reasonable. 
Wages  were  set  at  $0,027  per  ton,  or  on  the 
basis  of  7  tons  an  hour,  at  $0.19  per  hour. 
The  men  actually  and  continuously  unloaded 
10  tons  an  hour  and  earned  $0.27  per  hour,  an 
increase  in  output  of  500  per  cent,  an  increase 
in  wages  of  69  per  cent.  The  increase  in  tons 
above  7  per  hour  was  wholly  voluntary,  a 
reflex  response  by  the  workmen  to  the  extra 
pay  offered  them. 

Railroad  repair  shops  throughout  the 
country  do  not  show  50  per  cent  efficiency  on 
an  average  as  regards  either  materials  or 
labor.  A  case  observed  in  recent  experience 
was  as  follows : 

A  foundry  made,  for  a  railroad  shop,  big 
cylinder  bushings.  These,  after  being  ma- 
chined in  the  railroad  shop,  weighed  about 
375  pounds,  but  the  original  easting  weighed 
1,780  pounds.  It  took  three  days  to  remove 
1,405  pounds  of  cast  iron.  It  should  have 
taken  less  than  one  day  if  the  rough  bushing 
had  weighed  only  600  pounds.  The  difference 
in  result  between  the  operation  as  carried  on 
and  the  standard  that  could  easily  have  been 
established  in  practice  is  reduced  to  financial 
expression  in  the  table  on  the  following- 
page: 


24        efficiexcy  as  a  basis  for  opepatiox 

Comparison  of  Costs. 

As  made.  Standard. 

Weight,  rough 1,780  600 

Cost  per  pound $0.04  $0.04 

Total  cost $71.30  $24.00 

Labor    3  days  1  dav 

Cost  of  labor,  $3.00  per  day.  ..         $9.00  $3.00 

Machinecharge,  $3.00  per  day.          $6.00  $3.00 

Overhead  charges,$3.00  per  day         $6.00  $3.00 

Total  cost $93.30       $31.00 

In  tills  same  shop  the  most  efficient  men 
were  checked  up  and  found  to  average  only 
60  per  cent  in  actual  output,  compared  to 
realizable  standards.  At  the  end  of  two  years 
of  persistent  effort  many  of  the  best  men 
were  brought  up  to  110  per  cent  efficiency, 
but  there  were  still  men  as  low  as  10  per  cent 
as  to  actual  output  compared  to  reasonable 
standard — the  same  standard  on  which  others 
realized  110  per  cent. 

In  another  big  locomotive  shop,  a  careful 
study  of  the  machines  which  had  been  in 
operation  for  20  years  showed  that  the  loca- 
tion of  75  per  cent  of  them  would  have  to  be 
changed,  so  as  to  facilitate  the  orderly,  ef- 
fective, and  economical  progress  of  work 
from  one  to  the  other.  This  and  other  elimi- 
nations of  wastes  doubled  the  output,  with 
less  labor  costs. 


TYPICAL    INEFFICIEyCTES  25 

In  consequence  of  general  shop  inefficiency 
and  operation  inefficiency  due  to  similar 
causes,  locomotive  repair  costs,  on  western 
railroads,  run  from  $0.08  to  $0.12  a  mile; 
yet  a  most  efficient  superintendent  of  motive 
power  on  a  large  transcontinental  road  suc- 
ceeded in  dropping  to  $0.05  and  had  only 
touched  the  high  spots,  his  well  considered 
opinion  being  that  $0.04  was  reasonably  at- 
tainable. On  another  transcontinental  road, 
repair  costs  per  mile  were  dropped  from 
$0.1374  to  $0.08  by  persistent  effort,  but  when 
the  efforts  were  relaxed  expenses  immedi- 
ately rose  to  $0.17.  They  should  have  come 
down  to  $0.06.  Eastern  and  southern  roads, 
with  their  small  engines,  better  coals,  and 
better  waters,  are  not  to  imagine  that  they 
show  any  higher  efficiency.  They  are  on  the 
whole  worse. 

A  leading  eastern  road  established  piece 
rates  in  its  car  shops  and  then  limited  the 
earning  power  of  the  men.  When  there  was 
a  sudden  demand  for  increased  car  repairs, 
the  limit  was  taken  off  and  the  men  doubled 
their  earnings.  Then  the  limit  was  put  back. 
The  large  eastern  roads  have  signally  failed 
in  attempts  to  increase  the  efficiency  of  their 
repair  shops. 


2G  EFFICTEXCY  AS  A   BASIS  FOR  OPERATION 

111  a  leading  southern  shop  many  men  were 
receiving  12-hours  pay  for  the  performance 
of  3-hours  work. 

Coal  wastes  on  railroads  are  almost  as  bad 
as  labor  and  material  wastes.  On  a  very 
large  railroad  system,  fuel  charged  per  1,000 
tons  of  train  weight  per  mile  averaged  260 
pounds ;  yet  actual  tests  where  all  coal  used 
was  weighed,  showed  a  consumption  between 
terminals  of  only  80  pounds.  This  actual  con- 
sumption could  be  doubled,  be  made  160 
pounds,  yet  this  standard  be  only  60  per  cent 
of  the  coal  paid  for. 

The  total  amount  of  preventable  material 
and  labor  wastes  and  losses  in  American  rail- 
road operation  and  maintenance  approxi- 
mates $300,000,000  a  year — not  less  real,  but 
more  easily  preventable,  than  the  $600,000,- 
000  of  fire  losses  and  fire-department  ex- 
penses, which  actually  occur  in  the  United 
States.  This  inefficiency  of  effort  pervades 
to  a  greater  or  less  degree  all  American 
activities. 

Mr.  F.  W.  Taylor,  who  has  given  twenty- 
five  years  to  the  minute  and  scientific  study 
of  efficiency,  and  who  as  an  incidental  conse- 
quence developed  high-speed  steels,  thus 
speaks  of  it. 


TYPICAL    INEFFICIENCIES  27 

That  the  first-class  man  can  do  in  most  cases  from 
two  to  four  times  as  much  as  is  done  on  an  average 
is  known  to  but  few  and  is  fully  realized  by  those 
only  who  have  made  a  thorough  and  scientific  study 
of  the  possibilities  of  men. 

This  enormous  difference  exists  in  all  of  the  trades 
and  branches  of  labor  investigated,  and  this  covers 
a  large  field,  as  the  writer  together  with  several  of 
his  friends  have  been  engaged,  with  more  than  usual 
opportunities,  for  twenty  years  past,  in  carefully  and 
systematically  studying  this  subject.  It  must  be 
distinctly  imderstood  that  in  referring  to  possibili- 
ties, the  writer  does  not  mean  what  a  first-class  man 
can  do  on  a  s])urt  or  when  overexerting  himself,  l)ut 
what  a  good  man  can  keep  up  for  a  long  term  of 
years  without  injury  to  his  health,  and  become  hap- 
pier and  thrive  under. 

Inefficiency  similar  to  that  in  the  manu- 
facturing shops  exists  in  all  building  oper- 
ations to  the  same  or  even  greater  extent. 
Mr.  Taylor  found  a  labor  efficiency  of  only  28 
per  cent  in  the  rough  labor  employed  in  the 
Bethlehem  Steel  Company's  yards.  The 
writer,  by  time  studies,  determined  an  effi- 
ciency of  only  18  per  cent  in  a  gang  of  labor- 
ers excavating  a  foundation,  and  even  less  on 
some  construction  work  in  the  erection  of  the 
large  office  buildings  in  New  York. 

When  brick-laying  conditions  are  standard- 
ized, bricks  have  been  laid  in  inside  walls  at 
the  rate  of  20  a  minute.     Three-quarter  inch 


28  EFFICIENCY  AS  A  BASIS  FOR  OPERATIOX 

rivets  in  structural  iron  work  have  also  been 
driven  at  the  rate  of  20  a  minute,  but  with  a 
continual  regular  performance  of  3,000  in 
10  hours.  Bricks  are  usually  laid  at  the  rate 
of  800  to  1,000  per  day,  and  rivets  driven  at 
similar  rate. 

The  United  States  and  State  agricultural 
bureaus  have  determined  like  inefficiencies  in 
farming  operations.  The  land  was  there,  the 
effort  was  there ;  but  owing  to  poor  prepara- 
tion of  soil,  poor  planting,  poor  cultivation, 
the  net  results  in  such  great  staples  as  cot- 
ton, wheat,  and  corn,  have  been  less  than  half 
of  what  proper  methods,  with  the  same  cli- 
mate, land  and  men,  have  since  realized. 

The  agricultural  stations  and  Mr.  Luther 
Burbank,  combined,  have  been  doing  for  ag- 
riculture what  Mr.  Taylor  and  his  disciples 
have  been  doing  for  the  machine  shops. 
y  In  our  whole  educational  system  there  is 
the  same  inefficiency.  Years  are  given  to 
study,  yet  better  results  have  been  attained 
in  months.  In  American  schools  the  two 
main  objects  of  education,  amenities  and  dis- 
cipline, are  largely  neglected ;  and  instead  an 
immense  amount  of  time  is  consumed  acquir- 
ing quantities  of  information  of  very  low 
absolute  or  ultimate  value. 


TYPICAL    INEFFICIEXCIES  29 

Inefficiency  is  not  a  local  evil.  It  extends 
through  the  whole  of  American  life — extends 
through  the  whole  industrial  life  of  the  world. 
The  Chinese  coolie,  who  as  a  daily  task  car- 
ries 100  pounds  27  miles  for  $0.27,  is  indus- 
trious and  hardworking,  but  not  more  effi- 
cient than  the  American  railroad  which 
moves  a  freight  car  an  average  of  23  miles  a 
day,  the  cars  at  best  averaging  only  half 
loads  per  mile. 

By  a  very  inefficient  use  of  his  brain  and 
muscles,  the  coolie  carries  the  maximum  load 
a  maximum  distance  for  a  minimum  price. 
The  American  railroad,  by  the  most  ad- 
vanced engineering  and  industrial  methods, 
carries  an  absurdly  small  net  load  for  an 
absurdly  small  distance  at  an  unnecessarily 
high  cost. 

Prevailing  inefficiency  is  not  a  lapse  from 
former  virtue.  We  cannot  praise  ' '  the  good 
old  times"  when  everything  was  done  better. 
The  coolie  in  spite  of  his  many  virtues  is  not 
better  than  the  railroad  whose  charges  per 
ton  mile  average  only  one-thirtieth  those  of 
the  coolie.  The  difference  is,  however,  that 
elementary  though  his  methods  are,  the  coolie 
has  high  standards,  evolved  during  many  cen- 
turies, but  in  Europe  and  America  the  rail- 


/^ 


30  EFFICIENCY  AS  A  BASIS  FOR  OPERATION 

road  and  the  modern  shop,  using  methods  of 
great  promise,  have  as  yet  no  standards. 

In  tabulating  inefficiencies  it  is  not  assumed 
that  it  is  a  human  ideal  to  work  hard  all  the 
time  and  spend  nothing. 

The  unit  is  the  man.  If  he  elects  and  can 
manage  it,  he  can  live  in  a  tub,  bask  in  the 
sun,  and  curtail  his  efforts  and  wants  to  a 
minimum.  If  he  elects,  he  can  work  hard  for 
days,  weeks,  or  months,  and  in  short  and 
riotous  extravagance  spend  all  he  has  accu- 
mulated. The  firefly  probably  is  chargeable 
with  both  extremes,  but  what  is  expected  is 
that  the  man  shall  emulate  the  firefly  in  work- 
ing efficiently  when  he  does  work,  whether 
the  total  time  given  to  work  be  long  or  short. 


Chapter  II 

NATIONAL    EFFICIENCIES;     THEIE     TEN- 
DENCIES AND  INFLUENCE 

TNEFFICIENCY  is  a  form  of  waste,  of 
"■•  loss;  it  lurks  ever^^wliere — in  processes, 
in  materials,  in  individuals  and  in  nations. 
There  is,  however,  a  difference  in  kind  be- 
tween the  tj^o^orms  of  inefficiency,  one  mani- 
fest in  processes  and  materials  and  the  other 
manifest  in  individual  or  nation.  To  the  effi- 
ciency of  a  process  or  in  the  use  of  a  material 
there  is  a  clearly  ascertainable  maximum, 
and  when  it  is  exceeded  the  material  gives 
way,  as  in  the  Quebec  bridge ;  but  to  the  effi- 
ciency of  an  individual  or  of  a  nation  there 
is  no  predeterminable  limitation.  In  the  pas- 
sion for  modern  scientific  accuracy  it  has 
proved  more  interesting,  and  more  has  been 
done  to  solve  the  lesser  problem  of  efficiency 
in  process  or  material,  almost  wholly  ignor- 
ing the  larger  problem  of  individual  or  na- 
tional efficiency. 

31 


33  EFFICIENCY  AS  A  BASIS  FOR  OPERATION 

Men  are  quick  to  catch  and  appropriate  the 
ideas  of  other  designers  as  to  bicycles,  steam 
engines,  gas  engines,  automobiles,  so  that  the 
same  standard  designs  and  performances  ul- 
timately occur  in  widely  scattered  countries ; 
but  individuals  and  nations  differ  funda- 
mentally not  nearly  so  much  in  the  degree  as 
in  the  nature  of  their  characteristics.  They 
differ  not  as  one  coal  from  another,  but  as 
sulphur,  carbon,  hydrogen,  and  radium  dif- 
fer. The  analogy  of  fuels  is  illuminating  and 
may  further  a  better  understanding  of  the 
whole  question  of  efficiencies.  If  a  coal  yields 
13,000  B.  t.  u.,  the  combustion  problem  is  to 
utilize  as  large  a  percentage  of  them  as  pos- 
sible. Other  elements  in  combustion  with 
oxygen  may  evolve  only  4,000  B.  t.  u.  per 
pound,  as  sulphur,  or  60,000  as  hydrogen;  or 
radium,  without  troubling  to  combine  with 
oxygen,  will  evolve  per  pound  210,000,000,- 
000  B.  t.  u.  or  thereabouts. 

It  is  the  province  of  the  chemist  to  deter- 
mine the  actual  number  of  heat  units  in  any 
element  or  combination,  so  that  we  have,  for 
each,  a  theoretical  maximum.  It  is  the  task 
of  the  combustion  engineer  to  devise  appar- 
atus which  will  utilize  the  largest  percentage 
of  the  heat  units  in  the  fuel;  but  the  more 


NATIONAL   EFFICIENCIES  33 

difficult  problem  of  the  economic  engineer  is 
to  select  the  fuel  and  burn  it  so  as  to  secure 
the  desired  result  at  lowest  cost. 

It  is  more  difficult  to  select  intelligently, 
between  the  limits  of  a  drift-wood  burning 
furnace  and  a  Diesel  crude-oil  motor,  the 
power  installation  for  a  tub  boat  than  it  is  to 
design  and  secure  good  furnaces,  good  boil- 
ers, or  good  engines.  A  very  elementary  fur- 
nace and  boiler  will  yield  50  per  cent  efficien- 
cy; the  best  boiler  and  furnace,  and  then  only 
under  exceptional  test  conditions,  may  yield 
as  much  as  85  per  cent;  and  no  increase  of 
expenditure,  no  increase  of  desig-ning  skill, 
have  thus  far  realized  90  per  cent.  When, 
however,  one  passes  from  sulphur  to  carbon, 
from  carbon  to  hydrogen,  from  hydrogen  to 
radium,  the  progression  is  not  one  of  80  per 
cent  improvement  between  best  and  poorest, 
but  the  best,  radium,  is  fifty  million  times  bet- 
ter than  the  poorest,  sulphur. 

Applying  the  analogy  of  fuels  to  individ- 
uals and  nations,  we  have  as  yet  no  analysis 
of  humanity  which  will  enable  anyone  to  de- 
termine their  capabilities.  We  do  know  how 
the  best  individual  will  react  against  some 
definite  mechanical  proposition;  we  do  know 
the  best  record  as  to  running  or  swimming  or 


34  EFFICIENCY  AS  A  BASIS  FOR  OPERATION 

any  other  athletic  or  manual  performance, 
with  the  certainty  that  it  will  never  be  appre- 
ciably bettered ;  bnt  even  this  knowledge  has 
as  yet  been  utilized  to  very  small  extent,  out- 
side of  sjDort,  to  increase  individual  efficiency 
in  a  particular  task.  Our  manipulators  of 
human  material  are  constantly  using  human 
radium  on  a  grate  intended  for  lignite  coal, 
very  much  as  the  early  engineers  in  the  natu- 
ral gas  fields  used  natural  gas  expansively  to 
drive  engines  originally  built  for  steam. 

The  difference  between  sulphur  and  radi- 
um as  evolvers  of  heat  is  fully  paralleled  in 
the  difference  between  the  Italian  immigrant 
(who,  with  wheelbarrow,  works  at  less  than 
20  per  cent  efficiency  on  the  railroad  clump), 
and  the  Corsican,  of  poverty-stricken  ante- 
cedents, who  in  early  manhood  pushed  the 
whole  of  Western  Europe  and  also  the  two 
Americas  a  hundred  years  forwards.  It  is 
not  assumed  that  every  immigTant  boy  is  an 
embryo  Napoleon;  but  from  John  Jacob 
Astor  on,  foreign  immigrants  who  would 
have  remained  peasants  in  their  own  country 
have  become  dynamic  forces  in  the  New 
"World,  simply  because,  to  these  radium  indi- 
viduals, opportunity  occurred. 

As  to  any  man,  and  as  to  any  nation,  the 


NATIONAL  ]:fficikncies  35 

as  yet  unsolved  problems  of  efficiency  are : 
(1),  to  enable  each  to  accomplish  the  utter- 
most in  reaction  with  the  task  set,  average 
present  efficiencies  being  about  60  per  cent; 
and  (2),  to  set  each  at  the  highest  task  of 
which  it  is  capable,  present  average  efficien- 
cies being  so  much  below  one  per  cent  of  the 
best  as  not  to  warrant  an  estimate. 

The  differences  between  coal  and  coal  are 
molecular;  the  differences  between  sulphur 
and  radium  are  atomic.  The  differences  be- 
tween the  speed  of  one  runner  and  another, 
the  natural  resources  of  one  nation  and  an- 
other, are  physical;  the  differences  between 
the  spirit  of  Diogenes  and  the  spirit  of  Na- 
poleon, between  the  spirit  of  the  Papuan  and 
the  spirit  of  the  American,  are  psychical. 

Inherited  wealth  and  inherited  power  have 
rarely  made  men  great,  although  when  young 
heirs  first  come  into  their  inheritance  they 
may  for  a  short  time  dazzle  by  their  prod- 
igality. Great  natural  resources  will  not  in 
the  long  run  maintain  nations,  although  dur- 
ing the  period  of  reckless  squandering  they 
may  seem  prosperous  to  themselves  and  to 
others.  For  the  past  10,000  years  Central 
Africa  has  teemed  with  natural  resources, 
but  it  was  the  Vikings  of  bleak  Norway  who 


K 


36  EFFICIENCY  AS  A  BASIS  FOR  OPERATION" 

conquered  the  European  and  Mediterranean 
littoral,  incidentally  also  taking  possession  of 
Iceland,  Greenland,  and  visiting  the  north- 
east coast  of  America. 

Alaska  is  a  more  favored  region  than 
either  Norway  or  Switzerland.  It  has  100,- 
000  square  miles  of  agricultural  land,  the 
best  coal  in  North  America,  lead,  copper,  sil- 
ver and  gold  mines,  vast  forests,  rich  fish- 
eries, a  great  fur  trade,  and  20,000  miles  of 
ice-free  seacoast,  harbor-indented,  along  the 
great  Pacific  highway  between  all  Asiatic  and 
all  North  American  ports.  The  Eskimo, 
Aleuts,  Indians,  and  mongrels  of  Alaska,  sur- 
rounded by  unparalleled  natural  resources, 
have  accomplished  little,  although  their 
supineness  has  been  no  greater  drawback 
than  the  stupendous  ignorance,  neglect,  and 
corruption  to  which  this  empire  of  the  future 
(if  men  are  forthcoming)  has  been  subjected 
by  some  of  the  departments  at  Washington. 
The  Swiss,  for  whom  nature  has  done  so 
little,  have,  individually  and  nationally,  de- 
veloped high  efficiency.  When  Alaska,  the 
relatively  richer  country  of  the  two,  has  as 
many  inhabitants  as  Switzerland  in  propor- 
tion to  its  area,  it  will  be  a  nation  of  120,000,- 
000.    No  wonder  the  Canadians,  with  nearly 


NATIONAL  EFFICIENCIES  37 

six  times  the  area  of  Alaska,  have  hopes  of 
repeating  in  America  the  polar  drift  of  em- 
pire so  manifest  in  Europe,  Asia,  Africa, 
South  America,  and  Austrakisia. 

Between  one  civilized  country  and  another 
there  are  extremes  of  variation  in  natural 
resources,  yet  all  are  prospering.  The  effi- 
ciency of  the  workers  in  all  of  them  is  low,  yet 
each  country  is  growing  rapidly  in  wealth. 
The  cause  of  prosperity  cannot  lie  in  natural 
resources,  since  some  of  the  countries  with 
the  most  resources  are  most  backward  and 
others  with  the  poorest  resources  are  most 
forward.  The  cause  of  prosperity  cannot  lie 
in  the  ability  or  fidelity  of  the  workers,  since 
all  of  them,  when  checked  up,  are  found  to  be 
of  low  average  efficiencj".  The  cause  of  suc- 
cess must  therefore  lie  either  in  some  com- 
mon trait  which  all  possess,  or  in  the  ex- 
ploitation of  some  different  trait  in  each. 
The  only  common  trait  is  ambition,  the  de- 
sire for  success  and  wealth;  but  the  gratifi- 
cation of  ambition,  the  attainment  of  material 
success,  has  each  time  been  due  to  a  different 
psychical  instinct.  In  Alaska  the  eagle,  the 
seal,  and  the  bear  all  grow  fat  by  feeding  on 
salmon.  The  food  is  common  to  all  three,  but 
the   method   of   appropriation   is    different. 


238548 


38  EFFICIENCY  AS  A  BASIS  FOR  OPERATION 

The  eagle  descends  from  the  air,  and  lifts  the 
salmon  out  of  the  sea ;  the  seal  pursues  and 
seizes  the  salmon  in  the  water  of  the  sea ;  and 
the  bear  scoops  him  out  with  his  paw  when 
he  finds  him  in  the  shallow  brooks.  The  Brit- 
ish, French,  Germans,  hunt  success  along 
lines  as  different  as  those  of  the  eagle,  the 
seal  and  bear.  It  is  easier  to  describe  the 
psychical  differences  between  eagle,  seal  and 
bear  than  to  describe  the  psychical  differ- 
ences between  the  great  industrial  nations. 
Nevertheless  the  differences  exist,  and  the 
causes  of  the  respective  successes  cannot  be 
understood  unless  the  reaction  of  success  of 
these  psychical  traits  is  apprehended;  and, 
what  is  more  important,  that  nation  will  in 
the  long  run  reach  a  higher  level  which  is  able 
not  only  to  appropriate  the  best  designs  and 
processes  of  its  rivals,  but,  what  is  immeas- 
urably more  important,  to  appropriate  also 
and  possibly  to  improve  their  psychical  in- 
spirations. 

The  English,  the  French,  the  Germans,  the 
Japanese,  the  Americans,  are  not  great  be- 
cause they  all  have  schools  and  seaports  and 
coal,  but  because  schools  and  seaports  and 
coal  mines  have  fed  wholly  different  natural 
characteristics.     To  discover  these  different 


NATIONAL  EFFICIENCIES  39 

national  characteristics  it  is  necessary  to 
back  off,  both  in  space  and  time,  so  as  to  lose 
details  and  see  only  the  governing  traits.  No 
nation  can  be  reduced  to  a  formula,  but  an 
attempt  will  be  made  to  separate  out,  for  a 
number  of  leading  industrial  nations,  traits 
of  which  they  more  or  less  seem  to  possess  a 
monopoly,  and  which  for  that  very  reason 
merit  careful  analysis  by  their  rivals. 

In  recent  centuries  Great  Britain  has  been 
easily  the  leader  both  commercially  and  in- 
dustrially. The  English  also  were  up  and 
doing  before  daybreak  in  other  directions, 
and  by  the  time  the  other  nations  woke  up, 
either  yawningly  or  to  the  sound  of  some 
revolutionary  alarum,  the  English  were  any- 
where from  several  decades  to  several  cen- 
turies on  their  way.  They  limited  the  power 
of  kings,  1215  A.  D.;  they  abolished  divine 
right  in  1649,  selected  by  vote  their  own  sov- 
ereign in  1689.  The  American  colonists  woke 
up  in  1776,  the  French  in  1789,  the  Germans 
in  1871.  During  the  period  when  other  na- 
tions were  pulling  each  other  down  in  conti- 
nental Europe,  the  English  were  appropri- 
ating large  parts  of  Asia,  America,  and  Af- 
rica as  well  as  the  continental  islands.  ^Tien 
other  nations  were  using  wood  and  develop- 


40  EFFICIENCY  AS  A  BASIS  FOR  OPERATION 

ing  charcoal  burners,  the  British  were  open- 
ing coal  mines.  When  other  nations  were 
building  post  roads,  the  British  were  string- 
ing iron  rail ;  when  the  Americans  were  build- 
ing the  best  and  fastest  wooden  clipper  sail- 
ing ships,  the  British  were  not  only  building 
iron  steamers,  but  they  were  also  calmly  tak- 
ing possession  of  all  the  strategic  points  of 
the  seven  seas.  While  other  nations  were 
stretching  wires  on  poles  along  railroad 
rights  of  way  within  their  own  boundaries, 
the  British  were  enmeshing  the  globe  with 
submarine  cables.  It  is  not  because  the  Brit- 
ish are  the  greatest  shipbuilders  that  they 
control  the  sea,  but  they  incidentally  build 
ships  and  a  few  other  things  because  at  least 
100  years  before  any  one  else  realized  its  im- 
portance, they  made  the  unclaimed  empire  of 
salt  water  their  own.  For  ^ny  other  power 
at  this  late  date  to  aspire  to  rivalry  on  the  sea 
is  futile — is  laughable. 

Consider  the  North  Sea.  Sweden,  Eussia, 
Germany,  Holland  and  Belgium,  all  the  im- 
mense maritime  trade  of  Northern  Europe, 
goes  to  and  comes  from  the  Atlantic  Ocean 
and  all  there  is  beyond,  through  what  the 
English  proudly  call  the  English  Channel, 
with  the  cliffs  of  Dover  at  one  end  and  on  one 


NATIO^rAL   EFFICIENCIES  41 

side  and  the  Cliannel  Islands  at  the  other  end 
on  the  other  side.  Consider  the  Mediterran- 
ean, bottled  up  at  one  end  at  Gibraltar  and 
at  the  other  by  the  French-conceived,  de- 
signed, and  dug,  but  at  present  English- 
owned  Suez  Canal,  with  Malta  conveniently 
and  centrally  located  in  the  waist,  with 
Cyprus  watching  the  egress  from  the  Black 
Sea  of  both  Turk  and  Euss.  The  only  na- 
tions in  Europe  who  can  go  to  sea  without 
British  consent  are  the  Norwegians,  the 
French,  the  Spanish  and  the  Portuguese. 
Consider  the  Atlantic  Ocean,  north  and  south, 
studded  with  British  mainland  ports  and 
island  outposts  along  all  its  four  sides,  and 
up  and  down  through  the  middle.  Consider 
the  Indian  Ocean — Cape  Colony  at  the  west- 
ern southern  end,  Australia  at  the  eastern 
southern  end,  the  western  northern  entrance 
blocked  at  Aden,  the  eastern  northern  en- 
trance blocked  at  Singapore,  with  Mauritius, 
Ceylon  and  sundry  other  islands  scattered 
centrally  around,  very  useful  for  all  sorts  of 
purposes,  coaling  and  repair  stations,  land- 
ings for  submarine  cables,  shores  for  space 
telegraph  installations.  Consider  the  Pacific 
Ocean — not  quite  so  completely  a  British  sea, 
but  nevertheless  even  in  it  they  would  be  first 


42  EFFICIENCY  AS  A  BASIS  FOR  OPERATIOISr 

in  length  of  sea  coast  were  it  not  for  Alaska's 
indented  mainland  and  islands.  Although 
second,  as  to  mere  length  of  shore  line,  they 
have,  both  on  American  and  Asiatic  side, 
strategically  a  greater  nnmber  of  important 
posts,  not  counting  Australia  and  New  Zea- 
land to  the  South,  than  any  other  power,  and 
when  the  all-British  cable  was  laid  from  Van- 
couver to  Australia  and  New  Zealand,  as 
many  British  islands  as  were  needed  turned 
up  conveniently  for  mid-ocean  stations. 

Not  content  with  commanding  the  Euro- 
peon  Mediterranean,  they  also  command  the 
American  Mediterranean,  with  the  counter- 
part of  the  Suez  Canal  in  the  St.  Lawrence 
River,  the  deep-water  channel  between  the 
Great  Lakes  and  the  Atlantic.  They  also 
control  one  side  of  the  water  passage  from 
Lake  Erie  to  Lake  Ontario,  from  Lake  Huron 
to  Lake  Erie,  from  Lake  Superior  to  Lake 
Huron.  On  the  Pacific  side  of  North  Amer- 
ica it  is  the  same.  There  is  another  though 
smaller  inland  sea  there,  the  matchless 
Puget  Sound;  but,  in  spite  of  49  degrees 
north,  the  treaty  boundary  line,  the  British 
not  only  reserved  their  own  independent  sea 
outlet  north  of  Vancouver  Island,  but  they 
established  another  Gibraltar  at  Esquimalt, 


NATIONAL  EFFICIENCIES  43 

on  the  north  side  of  the  Fiica  Straits,  only 
entrance  to  the  largest  and  most  important 
American  harbor  on  the  west  coast,  but  com- 
manded by  British  gTins. 

Although  the  United  States  at  last  controls 
Panama,  during  the  whole  of  the  last  century 
it  was  not  anj^  American  statesman  who  fore- 
saw the  importance  of  this  control,  nor  was 
it  any  American  ambition  that  dared  attempt 
the  task  of  breaking  the  Isthmus. 

Two  hundred  years  ago  the  British  ap- 
propriated a  complete  chain  of  islands  cut- 
ting off  both  Gulf  of  Mexico  and  Caribbean 
Sea  from  the  Atlantic  Ocean;  in  1827  Goethe, 
in  a  masterly  discussion  of  the  importance  of 
the  Isthmian  Canal,  said:  "I  would  be  sur- 
prised if  the  United  States  would  miss  the 
chance  to  get  such  a  work  into  her  own  hands. 
It  is  entirely  indispensable  for  the  United 
States  to  make  the  passage  to  the  Pacific 
Ocean,  and  I  am  certain  that  she  will  accom- 
plish it." 

It  was,  however,  not  the  near-by  United 
States  that  first  undertook  the  work,  but  the 
distant  French. 

So  early  and  so  persistent  was  the  British 
instinct  of  sea  control  that  surprise  is  caused, 
not  that  the  British  have  so  much,  but  that 


44  EFFICIEXCY  AS  A  BASIS  FOR  OPERATION" 

tliey  let  so  much  of  value  slip  tlirongli  their 
fingers. 

By  right  of  exploration  they  might  have 
taken  possession  of  the  whole  of  equatorial 
Africa;  they  might,  without  anyone  making 
protest,  have  annexed  both  sides  of  the 
Straits  of  Magellan ;  they  might  have  seized 
on  both  the  Diomede  Islands  in  the  middle  of 
Bering  Straits,  and  it  is  incredible  that  after 
discovering  the  Hawaiian  Islands  they  should 
have  let  them  go. 

For  the  British  these  islands  have  strategic 
location  and  value  because  the  only  direct 
sea  route  on  which  they  are  situated  is  the 
one  between  Vancouver  and  New  Zealand. 
They  are  of  no  value  strategically  to  the 
United  States,  as  they  lie  at  least  1,000  miles 
south  of  any  direct  route  from  the  United 
States  to  Asia,  lie  1,000  miles  out  of  the 
course  of  steamers  making  the  run  from  Pan- 
ama to  Singapore,  and  the  attempt  to  mag- 
nify them  as  an  important  sea  possession  of 
the  United  States  merely  accentuates  the  dif- 
ference between  the  deep-set  purpose  of  the 
English  and  a  fatuous  impulse. 

So  sensitive  are  the  British  as  to  anything 
that  appertains  to  the  control  of  the  sea  that 
they  get  into  a  panic  at  the  mere  suggestion 


NATIONAL  EFFICIENCIES  45 

of  tunneling  the  English  Channel,  or  flying 
an  aerodrome  across  the  Channel ;  and  when 
the  Germans  built  the  fastest  steamers  for 
the  Atlantic  trade,  the  English  did  not  rest 
until  they  had  evolved  a  new  form  of  steam 
engine,  a  new  form  of  screw  propeller,  had 
built  larger  boats  than  any  other  flag  pos- 
sessed, and  with  the  combination  regained 
the  lost  blue  ribbon  of  the  sea.  Similarly,  as 
soon  as  the  French,  Germans,  Americans  laid 
a  few  straggling  sub-oceanic  cables,  the  Brit- 
ish at  once  set  up  space-telegraph  stations  so 
that  soon  no  British  steamer  anywhere  need 
be  beyond  call  from  British  land. 

This  persistent  far-sight,  this  stubborn 
holding  on  to  an  ideal,  characterizes  the  Brit- 
ish bulldog  in  all  things,  although  illustrated 
above  only  as  to  sea  power;  and  it  is  per- 
haps well  for  the  rest  of  the  world  that  on 
the  whole  the  Briton  is  good-natured  and  that 
he  does  not  have  too  many  ideas. 

The  predominant  characteristics  of  the 
French  are  quite  different ;  none  the  less  ad- 
mirable— in  fact,  more  progressive.  The 
French  are  brilliant  innovators  and  as  a  na- 
tion they  think  logically  and  execute  artistic- 
ally. Their  revolution  had  its  inception  in 
the  work  of  the  encyclopedists,  and  its  cul- 


46  EFFICIEXCY  AS  A  BASIS  FOR  OPERATIOiN- 

mination    in    the    Code   Napoleon.      In   the 
Theatre  Frangais  the  prices  of  the  seats  are 
cut  into  the  solid  marble,  but  the  monogram  of 
the  government  is  detachable,  because  forms 
of  government  are  the  accident  of  the  mo- 
ment, but  the  principles  of  art  are  eternal. 
The  English  follow  up  persistently  a  few  all- 
important  matters.    The  French  evolve  bril- 
liantly along  entirely  new  lines.    The  French 
were  the  first  to  ascend  into  the  air  in  bal- 
loons, the  French  invented  and  made  prac- 
tical the  bicycle,  and  France  still  holds  all 
the  official  records  for  all  sorts  of  heavier- 
than-air  flight.    The  French  started  both  the 
gas   engine  and  the  automobile;  they  first 
used  rapid-fire  machine   guns,   the  mitrail- 
leuse ;  their  passenger  locomotives  make  the 
fastest  regular  runs  in  the  world;  they  de- 
veloped compound  locomotives,  and  also  the 
most  powerful  freight  locomotive,  the  Mal- 
let articulated,  is  of  French  design.     To  the 
French    we    owe    the    first    successful    sub- 
marines ;  to  a  Frenchman,  Daguerre,  we  owe 
photography,    and    to    another,    pyrometry, 
which  has  placed  metallurgy  on  a  scientific 
basis.    The  French  invented  and  put  into  ef- 
fect the  decimal  system,  which  has  been  uni- 
versally adopted  for  money  (except  by  the 


NATIONAL  EFFICIENCIES  47 

insular  British)  and  the  French  also  estab- 
lished and  maintained  bi-metallism,  without 
a  hitch,  for  70  years,  although  in  that  period 
the  greatest  fluctuations  that  the  world  has 
ever  experienced  occurred  in  the  relative  pro- 
duction of  gold  and  silver.  The  French  have 
always  had  the  intelligence  to  avoid  the  fi- 
nancial panics  that  have  disgraced  Great 
Britain,  Germany,  and  the  United  States. 
The  French  dug  the  Suez  Canal  and  also 
started  the  work  at  Panama.  Most  appro- 
priately, we  owe  to  the  French  modern 
stearine  candles,  the  Argand  burner,  and  the 
brilliant  use  of  the  electric  current  for  light. 
Storage  batteries  of  both  types  were  dis- 
covered in  France,  as  also  plate  glass,  rolled 
glass,  and  wire  glass.  A  Frenchman  first 
deciphered  the  hieroglyphics  of  Egypt;  an- 
other Frenclunan,  Pasteur,  expanded  and 
made  rational  the  practice  of  inoculation ;  an- 
other one,  Berthelot,  developed  modern 
chemistry,  and  to  the  French  we  owe  arti- 
ficial silk. 

It  was  because  the  French  teem  with  revo- 
lutionary ideas  that  Franklin's  ability  re- 
ceived from  them  more  immediate  and  cor- 
dial recognition  than  from  either  Americans 
or  British. 


48  EFFICIENCY  AS  A  BASIS  FOR  OPERATION 

The  characteristic  trait  of  the  French  is 
brilliant  innovation  carried  out  in  an  orderly, 
logical,  and  artistic  manner. 

Germany  is  one  of  the  world's  greatest  in- 
dustrial powers — so  menacing,  in  fact,  that 
the  eyes  of  the  industrial  and  commercial 
world  are  turned  apprehensively  in  her  di- 
rection. Until  recenth',  however,  she  has  al- 
ways been  bringing  up  the  rear,  the  slow  but 
sure  turtle  among  the  nations.  When  France, 
Spain,  and  England  were  parts  of  the  Roman 
Empire,  assimilating  Roman  civilization, 
Germany  was  a  storm  center  of  savage  fer- 
ment. Italy  officially  adopted  Christianity  in 
the  fourth  century,  France  became  Christian 
in  the  fifth  century,  but  it  was  not  until  the 
ninth  century  that  Charlemagne  gave  the 
Saxons  their  baptism  of  blood.  When  the 
French  and  English  were  evolving  parlia- 
ments and  courtly  manners,  the  Germans 
were  engaged  in  their  thirty-years'  war.  It 
is  characteristic  that  the  renascence  in  Italy 
and  France  took  the  form  of  a  revival  of 
classic  art,  literature,  and  culture;  in  Spain 
and  England  took  the  form  of  over-sea  ad- 
venture ;  but  in  Germany  the  form  of  relig- 
ious revival  and  reform.  It  is  also  not  less 
characteristic  that  while  other  nations  have 


NATIONAL  EFFICIENCIES  49 

made  progress  througli  revolution  and  vio- 
lence, the  Germans  are  rapidly  overtaking 
them  through  peaceful  evolution. 

American  wooden  clipper  vessels  were  the 
queens  of  the  sea  from  1800  until  the  intro- 
duction of  steam.  Previous  to  1870  the  only 
German  ship-building  was  in  the  Baltic  yards 
where  American  clipper  models  were  imi- 
tated, but  shortly  after  1870  Germany  ''re- 
solved" to  build  ocean  steamers,  and  in  25 
years  her  ocean  liners,  German-designed, 
German-built,  German-manned,  officered,  be- 
came the  fastest  and  finest  vessels  afloat.  It 
required  extraordinary  effort  on  the  part  of 
the  P]nglish  to  regain  the  lead.  America  has 
built  more  locomotives  and  owned  more  miles 
of  railroad,  many  times  over,  than  Germany, 
but  in  this  year  of  Grace  1908  it  is  the  Ger- 
man principle  of  superheating  that  is  being 
applied  in  the  design  and  construction  of 
American  locomotives. 

Germany  succumbed  helplessly  before  the 
genius  of  Napoleon  in  1806,  but  less  than  two 
generations  later  Von  Moltke  had  remodeled 
the  oldest  of  all  organization — militarj^ — b}^ 
adding  to  line  organization  the  principle  of 
developed  staff  organization,  and  it  is  staff 
organization  that  has  made  Germany  during 


50  EFFICIENCY  AS  A  BASIS  FOR  OPERATION 

the  last  40  years  easily  the  pre-eminent  mili- 
tary power  in  the  world. 

An  English  authority  on  iron  and  steel  has 
recently  shown  that  in  spite  of  adverse  natu- 
ral and  economic  conditions  which  make  the 
average  production  cost  of  German  pig  iron 
50  per  cent  higher  than  the  average  cost  of 
British  warrants,  yet  owing  solely  to  better 
organization  and  more  advanced  industrial 
discipline,  German  exports  of  iron  and  steel 
increased  350  per  cent  in  the  decade  from 
1897  to  1906-7,  while  the  British  increase  in 
the  same  period  was  only  10  per  cent. 
y  This  habit  of  the  Germans  of  "resolving" 
that  they  mil  accomplish  certain  results,  and 
then  forthwith  succeeding,  is  exceedingly  dis- 
concerting to  commercial  and  industrial  riv- 
als. Whether  the  subject  be  military  organ- 
ization, the  designing  of  ocean  steamers  or 
of  locomotives,  technical  or  industrial  train- 
ing, industrial  and  commercial  expansion,  all 
the  German  needs  to  do  is  to  desire  to  sur- 
pass— and  he  succeeds,  not  by  far-sighted  an- 
nexation of  a  field  not  yet  taken,  not  by  bril- 
liant creation  of  a  new  field,  but  by  patient 
improvement  on  the  model  supplied.  ^'Billig 
und  sclilecht!"  said  Prof.  Eeuleaux  of  the 
German  exhibits  at  the  Centennial  in  1876; 


NATIONAL   EFFICIENCIES  51 

"made  in  Germany,"  the  legislative  badge  of 
inferiority  in  1880;  but  today  German  prod- 
ucts are  no  longer  "Billig  und  schlecht/' 
and  in  many  lines  ''made  in  Germany"  is  a 
label  of  highest  excellence. 

It  is  fortunate  for  their  rivals  that  Ger- 
man efforts  are  so  often  indiscriminate,  that 
they  will  elaborate  mathematically  the  theory 
of  the  Dutch  windmill  and  overlook  the  siroc- 
co blower,  that  they  perfect  staff  organiza- 
tion in  the  army  and  that  they  have  failed  to 
apply  it  to  their  shops,  being  in  this  respect 
far  behind  the  best  American  developments. 

Americans  have  little  of  the  persistence  of 
the  English,  little  of  the  brilliancy  of  the 
French,  and  not  any  of  the  patient  science  of 
the  Germans.  The  immigrants  or  adven- 
turers who  of  their  own  choice,  full  of  faith 
and  hope,  came  to  the  land  of  sunshine  and 
opportunity,  were  the  restless,  daring  spirits 
of  all  the  nations  of  Europe ;  first  the  Span- 
iards, then  the  French,  later  the  English,  and 
more  recently  the  Irish,  the  Germans,  the 
Scandinavians,  the  Russians  and  the  Italians. 
For  all  these  the  past  held  but  light  ties ;  they 
came  to  stay,  and  the  little  they  did  bring  of 
mental  or  material  equipment  proved  of 
scant  value.    There  has  been  in  all  of  them. 


52  EFFICIENCY  AS  A  BASIS  FOR  OPERATION 

of  whatever  decade  or  nationality,  the  com- 
mon restlessness,  the  common  eagerness  to 
make  good.  Before  them  stretched  out  the 
promised  land,  forest  and  plains,  farms  and 
urban  sites,  transportation  monopolies,  min- 
erals. The  gold-seeker  in  California,  equipped 
with  elementary  courage  and  pick  and  shovel, 
exhausting  the  shallow  placers,  spending  the 
proceeds  in  individual  aggrandizement ;  such 
is  the  true  type  of  the  American,  whether  he 
be  named  Astor  or  Vanderbilt,  Rockefeller  or 
Morgan,  Jas.  J.  Hill  or  Harriman,  Carnegie 
or  Guggenheim.  Because  there  were  no  tra- 
ditions to  hamper,  because  those  prospered 
most  who  acted  most  energetically,  American 
enterprises  have  been  characterized  by  spas- 
modic and  disconnected  impulses,  very  dif- 
ferent from  the  dogged  pluck  of  the  English 
or  the  logical  development  of  the  French  or 
the  studied  results  of  the  Germans.  In 
z:-  America  personality  has  been  everything — 
personality  inbred  until  often  in  one  gen- 
eration it  becomes  sterile  from  lack  of  cross 
fertilization.  Because  of  different  person- 
ality, not  because  of  different  problems  or 
different  opportunity,  the  New  York  Central 
Railroad  and  the  Pennsylvania  Railroad  have 
grown  and  prospered,  but  the  Erie  Railroad, 


NATIONAL   EFFICIENCIES  53 

between  the  same  terminals,  has  always  been 
in  difficulties ;  and  because  of  varying  per- 
sonality, far  more  than  varying  conditions, 
such  railroads  as  the  Union  Pacific,  the 
Northern  Pacific  have  swung  up  and  down 
and  then  up  again  between  extremes  of  in- 
flation and  depression.  In  the  United  States 
whether  in  religion,  politics,  transportation, 
commerce  or  industry  there  is  no  persistence 
nor  clear  thought  nor  profound  preparation. 
An  agent  of  Lloyd's  visiting  the  Atlantic 
Coast  shipyards  of  the  United  States  re- 
ported that  American  materials  were  fully  as 
cheap  as  English  materials,  that  American 
wages  were  no  higher  than  British  wages,  but 
that  the  very  greatly  increased  cost  of  Amer- 
ican-built ships  was  due  wholly  to  the  enor- 
mous inefficiency  of  organization  and  per- 
formance. There  are  instances  in  an  Amer- 
ican shipyard  of  several  hundred  mechanics, 
lolling,  sleeping,  smoking  in  the  double  bot- 
tom of  a  battleship  under  construction, 
drawing  pay  but  doing  no  work  whatever. 
Yet,  when  the  mood  takes  the  American,  crea- 
tions more  stupendous,  more  beautiful  than 
the  world  had  ever  dreamed  of  suddenly 
spring  from  nothing,  as  in  the  filmy  beauty 
and  sublimity  of  the  World's  Fair  grounds 


54  EFFICIENCY  AS  A  BASIS  FOR  OPERATION 

and  buildings  at  Chicago,  yet  as  suddenly 
these  creations  fade  back  into  nothingness, 
leaving  only  a  memory;  while  Stonehenge, 
the  pyramids,  the  Parthenon,  Notre  Dame, 
St.  Peter's  endure. 

The  American,  whether  at  Chicago  in  1903 
or  on  the  Alaskan  White  Pass  in  1899,  crowds 
the  progress   of   2,000   years   into   a   single 
year ;  but  to  mark  the  milestones  of  time,  he 
leaves  neither  tombs,  cathedrals,  palaces  nor 
anytliing  else  that  holds  out  a  promise  of 
secular  endurance.     Individuality  has  been 
supreme,  it  has  accomplished  so  much.  There 
have  been  great  inventors — Franklin,  Howe, 
Maxim,  Edison,  AVestinghouse,  F.  W.  Taylor 
—but  what  they  have  created  has  rapidly  be- 
come the  property  of  all  mankind.     When 
lavish  opportunity  no  longer  exists,  when  in- 
vention becomes  less  the  inspiration  of  the 
moment  and  more  the  result  of  patient  re- 
search, how  then  will  it  fare  with  the  Amer- 
ican in  the  cosmopolitan  struggle  for  first 
place  ? 

Latest  of  the  civilized  nations  are  the  Jap- 
anese. The  occidental  world  was  opened  to 
them  by  Perry  in  1853,  and  as  late  as  1867 
they  were  still  using  bows  and  arrows,  two- 
handed  swords  and  chain  armor.    The  Ger- 


NATIONAL  EFFICIENCIES  55 

mans  and  the  Japanese  (not  counting  orien- 
tal Europe)  emerged  latest  from  feudalism 
and  rose  into  world  prominence  about  the 
same  date,  and  for  that  reason  both  have 
proved  dangerous,  because  both  were  com- 
pelled to  absorb  so  much  from  others,  and 
yet  were  able  to  supplement  it  with  their  own 
virile  special  virtues.  The  Japanese,  with  an 
open-mindedness  unparalleled  in  the  history 
of  the  world,  sent  forth  their  brightest  young 
men  to  England,  to  France,  to  Germany,  to 
the  United  States;  they  adopted  eclectically 
all  that  was  best,  adapted  to  their  own  needs 
what  they  had  selected,  and  soon  they  became 
adepts.  They  have  sat  at  the  feet  of  the 
English  in  all  matters  appertaining  to  the 
sea,  from  shipyard  to  ship  officers,  from  ship 
models  to  ship  insurance;  they  have  sat  at 
the  feet  of  the  Germans  in  all  matters  ap- 
pertaining to  military  organization,  and,  as 
the  expedition  to  Pekin  and  the  Russian  war 
showed,  improved  on  their  models ;  they  are 
as  logical  as  the  French  and  more  progress- 
ive than  the  Americans. 

Ascribing  to  the  English  the  efficiency  of    - 
wise  anticipation  and  continuous  persistence, 
to  the  French  the  efficiency  due  to  their  inno- 
vations of  supreme  value  and  merit,  to  the 


56  EFFICIElSrCY  AS  A  BASIS  FOR  OPERATION 

Germans  the  efficiency  due  to  their  perfection 
of  organization,  discipline  and  scientific  mi- 
nuteness, to  the  Japanese  the  efficiency  due  to 
open-mindedness  and  marvelous  power  of  as- 
similation, to  the  Americans  the  efficiency 
due  to  individuality — it  cannot  be  doubted 
that  it  would  be  more  desirable  and  produce 
better  results  to  graft  on  the  individualism  of 
the  United  States  persistence,  clear  habits  of 
thought,  scientific  patience  and  open-minded- 
ness, than  to  let  loose  intense  individuality 
among  the  English,  French,  Germans  and 
Japanese.  The  trouble  with  the  American  is 
that  as  3^et  he  is  provincial,  skeptical  as  to 
the  value  of  anything  outside  his  own  limited 
experience,  a  trait  amusingly  illustrated  in 
the  way  he  takes  for  granted  that  millions  of 
foreigners  shall  cheerfully  give  up  their  alle- 
giance for  the  sake  of  American  citizenship, 
but  is  indignantly  surprised  when  any  Amer- 
ican seeks  naturalization  in  Europe,  irritat- 
ingly  illustrated  by  the  way  he  repels  criti- 
cism by  the  childish  claim  that  his  conditions 
are  peculiar. 

The  boundless  natural  resources  of  Amer- 
ica are  being  exhausted.  Will  the  American 
forever  be  able  to  maintain  a  lead  through 
intense  individuality  alone,  or  will  he  indus- 


NATIONAL   EFFICIENCIES  57 

trially  as  a  nation  recede  before  the  German, 
even  as  native  American  names  have  disap- 
peared from  Broadway,  New  York,  and  been 
rephiced  by  miles  of  German  names?  Will 
mere  resourcefulness  suffice  in  the  future? 
Because  he  is  resourceful,  because  he  is 
adaptable,  because  he  has  always  delighted 
to  force  the  game  to  the  uttermost,  it  may  be 
that  all  he  needs  is  a  set  of  higher  standards, 
and  that  if  they  are  supplied  he  will  realize 
them  sooner  than  any  competitor. 

Standards  except  as  to  a  few  performances 
are  as  yet  undetermined  in  the  industrial 
world.  If  the  American  sets  them  high,  he 
may  attain  them,  and  the  prevalent  democ- 
racy may  make  it  easier  for  each  worker  to 
rise  to  the  limit  of  his  capacity. 


Chapter  III 

THE    STRENGTH   AND   WEAKNESS   OF   EX- 
ISTING SYSTEMS  OF  ORGANIZATION 

T  T  is  notorious  that  great  aggregations  of 
^  wealth  and  power  usually  do  not  operate 
as  efficiently  as  smaller  concerns.  Nothing 
in  the  United  States  is  so  gigantically  ineffi- 
cient in  proportion  to  its  power  and  oppor- 
tunities as  the  United  States  Government, 
equally  in  what  it  attempts  and  in  what  it 
fails  to  attempt. 

The  great  industrial  and  transportation 
corporations  are  often  very  efficient  in  manip- 
ulation, but  content  with  low  efficiency  of 
operation,  although  there  are  notable  excep- 
tions. The  great  ocean  ship-building  yards 
from  Maine  to  Virginia,  from  Puget  Sound 
to  the  Bay  of  San  Francisco,  depend  not  at 
all  on  the  internal  efficiency,  (which  enables 
the  International  Harvester  Company,  al- 
though a  thousand  miles  inland,  to  export  in 
competition  with  the  whole  world)  but  solely 
58 


EXISTING   SYSTEMS  OF  ORGANIZATION"  59 

on  absolute  prohibition  of  competition  and 
on  lavish  government  appropriations.  It  is 
the  little  American  plant  manufacturing-  au- 
tomobiles, motor  boats,  or  bicycles,  making 
locomotive  repair  parts,  or  some  other  spec- 
ialty, that  defies  the  competition  of  the  world. 
The  ten-million-dollar  and  upwards  com- 
,  pany  ought  to  be  able  to  supplement  every 
dollar-a-day  worker  with  a  two-hundred- 
thousand-dollars-a-year  staff  of  assistants, 
thereby  making  the  worker  four  times  as  ef- 
fective and  gaining  a  crushing  advantage 
over  the  smaller  concern  which  cannot  af- 
ford the  same  aggregation  of  specialized 
knowledge.  The  great  concerns,  however, 
have  conspicuously  failed  to  develop  this  ad- 
vantage, even  if  they  do  have  a  large  staff  of 
experts — a  very  different  thing  from  a  staff 
organization  which  gives  the  least  worker  the 
needed  direction,  stimulus  and  advice.  A 
two-hundred-thousand-dollar  staff  for  a  dol- 
lar-a-day man  is  neither  Utopian  nor  ex- 
pensive. On  the  contrary  it  is  to  the  highest 
degree  economical,  if  almost  infinitesimal  at- 
tention from  a  very  high-priced  man  will 
make,  as  to  his  specialty,  one  thousand  or 
twenty  thousand  low-priced  men  four  times 
as  effective. 


60  EFFICIENCY  AS  A  BASIS  FOE  OPERATION 

To  preserve  the  adult  individual,  Nature 
uses  staff  organization ;  to  preserve  the  race, 
Nature  uses  line  organization.  Both  are 
necessary,  and  they  may  operate  separately, 
they  may  alternate,  they  may  work  in  paral- 
lel; but  always  and  everywhere  it  is  one  or 
the  other  or  a  blending  of  both.  Man,  the 
individual,  is  fitted  out  with  a  number  of  aids, 
each  far  superior  to  him,  each  knowing  what 
to  do  and  how  to  do  it,  knowing  how  to  re- 
spond to  his  every  call  to  the  extent  of  its 
ability.  His  lungs,  his  heart,  his  stomach, 
his  nervous  system,  how  instantaneously  they 
come  to  his  rescue  in  an  emergency !  On  the 
other  hand,  a  father  is  succeeded  in  time  by 
his  son,  one  generation  gives  way  to  another ; 
' '  the  king  is  dead,  long  live  the  king ! ' '  This 
is  line  organization. 

The  strength  of  line  organization  lies  in  its 
indestructibility.  A  company  cannot  be  de- 
stroyed as  long  as  two  men  are  left.  The 
captain  is  succeeded  by  the  lieutenant,  and  if 
this  one  falls,  a  petty  officer  takes  command. 
There  is  always  some  one  in  authority.  The 
weakness  of  line  organization  is  that  no  one 
man  knows  much  more  than  any  other,  that 
promotion  is  by  seniority  and  not  by  merit 
If  a  company  loses  its  way  in  the  woods  it  is 


EXISTING   SYSTEMS  OF  ORGANIZATION  61 

all  lost  together.  The  captain  has  no  special 
knowledge  to  meet  the  emergency.  The  weak-  . 
ness  of  staff  organization  is  that  if  one  mem- 
ber of  the  staff  collapses,  the  whole  organi- 
zation goes  to  pieces/as  when  the  heart  stops 
heating  or  the  lungs  fail  to  find  air.  The  ^ 
strength  of  staff  organization  lies  in  its  abil- 
ity to  multiply  many-fold  the  effectiveness  of 
other  staff  members/  all  cooperating  to  make 
possible  such  a  wonderful  thing  as  a  man,  a 
humming  bird,  a  midge,  or  a  yellow-fever 
microbe. 

Organization  may  be  conscious  or  uncon- 
scious. The  authority  in  charge,  whether  in- 
dividual or  intangible,  whether  one  or  many, 
may  know  how  to  do  the  work  or  may  not 
know  how  to  do  it.  In  the  first  case  i^erform- 
ance  may  be  delegated  to  subordinates ;  in 
the  second  case  it  must  be,  if  the  work  is  to 
be  well  done,  the  actual  worker,  as  far  as  the 
work  is  concerned,  being  a  subordinated  su- 
perior. The  most  perfectly  organized  entity 
in  the  universe  is  the  living  thing.  There  is 
an  unconscious,  unseen  authority  over  it,  not 
in  the  theological  sense,  but  in  the  instincts 
with  which  it  is  endowed. 

Passing  from  the  single  body  to  a  com- 
munity or  family,  we  find  similar  organiza- 


62  EFFICIENCY  AS  A  BASIS  FOR  OPERATION 

tion,  a  central  authority  supported  and  sup- 
plemented by  special  staffs.  Isms  fail — 
individualism,  communism,  socialism,  despot- 
ism— not  because  there  is  not  serviceable 
value  in  each,  but  because  form  of  organiza- 
tion counts  for  more  than  theoretical  ism, 
and  the  highest  organization  relies  on  and 
utilizes  all.  Institutions  have  evolved  from 
the  primitive  family  and  tribal  life  of  birds 
and  mammals,  and  birds  and  mammals,  not- 
ably man,  have  evolved,  molded  by  forms  of 
organization. 

There  is  always  line  and  staff  in  organic 
nature.  Line  organization  developed  in  its 
specially  human  form  not  in  the  family  or 
tribe,  but  when  men  gathered  in  bands,  gen- 
erally for  mischief  or  damage  either  to  ani- 
mals or  to  others  of  their  own  kind.  The 
experienced  hunter  led  a  band  on  a  hunting 
expedition  or  the  fisher  led  a  company  to 
fish.  As  the  hunters  developed  into  ma- 
rauders, as  the  fishermen  developed  into  buc- 
caneers, there  was  pure  line  organization  and 
very  little,  if  any,  staff.  The  hunter  and  war 
captain  had  himself  been  hunter  and  warrior, 
the  captain  of  the  boat  had  been  fisher  and 
fighter.  Because  he  was  older  and  stronger 
or  more  experienced,  he  commanded  other 


EXISTING   SYSTEMS  OF  ORGANIZATION  G3 

men,  none  of  whom  knew  more  than  he  did. 
When  the  medicine  man  or  priest  accepted  a 
disciple  there  was  even  less  chance  for  staff, 
since  the  adept  knew  far  more  than  the  neo- 
phyte. Thus  all  through  the  development  of 
army,  of  navy,  of  church,  we  find  line  organ- 
ization, whose  unit  is  the  company,  headed 
by  a  captain.  This  kind  of  organization  is  at 
the  opposite  extreme  from  pure  staff  organi- 
zation found  in  the  living  body,  and  it  is  also 
distinct  from  the  mixed  line  and  staff  found 
in  primitive  family  life.  The  shops  and 
schools  adopted  line  organization  almost 
without  modification.  There  was  indeed  sub- 
division of  labor,  since  all  foremen  did  not 
direct  similar  activities  nor  all  teachers  teach 
the  same  branches,  but  these  differentiations 
were  not  into  staff  functions. 

Some  modern  organizations  of  tremendous 
strength  are  those  in  which  staff  alternates 
with  line,  as  in  a  baseball  team.  The  ins  play 
in  line  organization,  all  subject  to  the  cap- 
tain, each  passing  through  exactly  the  same 
round,  since  a  part  of  the  play,  as  to  its  en- 
tirety, is  handled  by  each.  The  outs,  also  sub- 
ject to  the  captain,  play  distinctly  in  staff 
organization,  the  pitcher,  singly,  doing  all  the 
pitching  against  each  of  the  ins,  the  catcher, 


64  EFFICIENCY  AS  A  BASIS  FOR  OPERATION 

singly,  doing  all  the  catcliing  against  each  of 
the  ins.  The  whole  inning  is  played  by  each. 
It  is  because  the  staff  specialists,  the  pitcher, 
the  catcher,  etc.,  are  superior  to  the  average 
skill  of  the  ins  and  combine  against  each  one 
separately,  that  in  the  best  games  there  is  no 
score. 

In  all  organizations  line  and  staff  have 
their  place.  Organization  has  always  been  a 
means  to  an  end,  and  it  has  therefore  always 
been  an  evolution  rather  than  a  creations/gen- 
erally lagging  beliind  requirements.  Long 
after  the  time  when  staff  should  have  come  to 
the  rescue  of  line,  line  traditions  and  line 
prejudices  have  continued  to  prevail,  each 
line  officer  trying  to  create  a  staff  of  his  own. 
In  the  navy  a  strong  staff  has  by  a  process  of 
compulsion  been  added  to  the  line.  Supreme 
as  he  was,  no  sea  captain  quite  dared  to  claim 
that  he  knew  all  about  furnaces  and  boilers, 
engines  and  propellers,  refrigerating  and  il- 
luminating accessories,  so  there  have  been 
developed  in  marine  organization  very  strong 
staffs.  There  was  not  the  same  compulsion 
in  the  army.  It  is  Von  Moltke's  greatest 
claim  to  fame  that  he  perceived  the  deficiency 
of  line  organization  in  the  army  and  supple- 
mented it  with  the  general  staff  which  made 


EXISTING   SYSTEMS  OF  ORGANIZATION  65 

the  Prussian  army  the  marvelously  supreme 
organization  it  became  shortly  after  1860. 
The  theory  of  a  general  staff  is  that  each 
topic  that  may  be  of  use  to  an  army  shall  be 
studied  to  perfection  by  a  separate  special- 
ist, and  that  the  combined  wisdom  of  these 
specialists  shall  emanate  from  a  supreme 
staff.  The  specialist  knows  more  about  his 
one  subject  than  all  the  rest  of  the  army  put 
together,  but  the  whole  army  is  to  profit  by 
his  knowledge.  One  man  may  be  the  author- 
ity on  military  maps,  another  on  balloons, 
another  on  roads  and  road  making,  another 
on  sanitation,  another  on  explosives  or  rapid- 
fire  guns,  an  ever  widening  list.  Nothing  is 
to  be  left  to  chance,  or  to  individual  ignor- 
ance or  brilliancy. 

The  North  Germans  were  not  more  cour- 
ageous, not  better  individual  fighters  than 
the  South  Germans,  the  Austrians,  the  Hun- 
garians or  the  French.  Napoleon  in  1806  had 
no  difficulty  in  defeating  the  military  organi- 
zation of  Prussia,  inherited  from  Frederick 
the  Great,  and  it  took  nearly  ten  years  of 
European  coalition,  all  of  Russia,  all  of  Aus- 
tria, all  of  Germany,  all  of  Great  Britain,  to 
overthrow  the  French.  The  Prussian  army 
in  the  decade  1860-70  became  what  it  was,  not 


66  EFFICIENCY  AS  A  BASIS  FOR  OPERATION 

on  account  of  men  or  arms,  but  through  the 
supreme  genius  of  one  man,  whose  creation, 
the  general  staff,  used  the  line  organization 
as  one  of  the  means  or  implements  to  the  all- 
important  end. 

If  a  man  has  special  military  aptitudes, 
special  genius,  the  staff  is  the  place  for  its 
opportunity  and  development.  In  the  line 
special  genius  only  makes  trouble.  Grant  de- 
prived General  Butler  of  his  command  be- 
cause Butler  did  not  know  how  to  obey.  Nom- 
inally, under  Von  Moltke's  plan,  the  line  re- 
mained supreme,  the  highest  command  being 
vested  in  the  King  of  Prussia,  though  he  was 
merely  the  spokesman  for  staff  plans,  even  as 
in  England  the  monarchical  line  is  supreme 
with  its  personal  staff  of  earl  marshals,  etc., 
5^et  all  the  real  power  lies  with  the  cabinet,  a 
staff  organization.  It  was  owing  to  staff 
knowledge  and  staff  plans  that  in  1866  the 
Prussian  army,  two  weeks  after  the  outbreak 
of  hostilities,  overthrew  the  combined  armies 
of  Austria  and  of  South  Germany.  It  was 
owing  to  staff  organization  that  the  united 
German  army  of  1870  on  September  2  at 
Sedan  decided  the  war  against  France,  de- 
clared July  14.  The  French  plans  for  mobili- 
zation required  19  days,  but  Von  Moltke's 


EXISTING   SYSTEMS  OF  ORGANIZATION  67 

plan  for  German  mobilization  required  18 
days,  and  it  was  strictly  carried  out  in  neither 
more  nor  less  days  than  the  18.  The  French 
mobilization  took  21  days,  and  this  delay 
placed  the  seat  of  war  in  France  instead  of 
along  the  frontier  or  in  Germany.  French 
officers  were  not  even  provided  with  maps  of 
French  territory.  The  French  plan  of  cam- 
paign failed  before  it  was  even  tried,  because 
of  the  fatal  3  days'  delay.  On  August  6,  only 
23  days  after  the  outbreak  of  hostilities,  one 
of  the  bloodiest  battles  of  the  war  occurred. 
Napoleon  I.  was  a  marvelous  genius,  but  he 
worked  with  line  organization  against  line 
organization;  he  had  to  get  rid  of  all  his 
rivals,  make  himself  ruler,  dictator,  emperor, 
before  he  could  carry  out  his  plans.  Von 
Moltke  left  the  line  undisturbed,  gathered  his 
eminent  military  contemporaries  into  the 
general  staff  with  him,  and  through  the  staff 
gave  his  king,  the  head  of  the  line,  an  organi- 
zation before  which  all  the  military  power  of 
Europe  crumbled.  It  was  King  William's 
great  merit  that  he  had  the  good  sense  to 
listen  to  the  staff  advice  of  such  specialists  as 
Yon  Moltke  for  war,  Bismarck  for  diplomacy. 
Tlie  Japanese,  seeking  the  best  there  was  in 
Western  organization,  adopted  and  perfected 


68  EFFICIENCY  AS  A  BASIS  FOR  OPERATION 

in  their  army  the  Prussian  staff  system.  At 
the  relief  of  Pekin  they  proved  themselves  in 
all  staff  matters  superior  to  any  of  the  allies, 
the  Germans  included.  Their  maps,  their 
Red  Cross,  their  commissariat,  their  disci- 
pline, their  humanity  were  all  better.  The 
superiority  of  the  Japanese,  both  before  and 
during  the  war  with  Russia,  was  due  even 
more  to  Japanese  staff  knowledge  and  staff 
skill  than  to  the  high  ideals  and  bravery  of 
the  individual  soldiers  and  sailors  that 
brought  about  the  final  victory. 

Yet  even  Von  Moltke's  marvelous  combi- 
nation of  old  line  and  modern  staff  could  not 
be  adapted  without  change  to  railroad  or 
manufacturing  activities.  Its  deficiency  lies 
in  the  fact  that  the  members  of  the  line,  who 
are  many,  are  excluded  from  intimate  rela- 
tions with  the  staff,  which  is  numerically  so 
weak.  When  the  line  is  supreme  there  is  a 
great  deficiency  of  special  knowledge.  When 
the  staff  is  supreme  there  is  a  great  defi- 
ciency of  personal  fructifying  experience/  In 
last  analysis  the  man  in  line,  the  man  down 
at  the  ]jottom  of  the  line,  meets  with  diffi- 
culties, and  he  is  the  one  who  most  needs 
staff  assistance  for  his  special  case.  He  i;; 
the  one  who  should  be  able  to  call  on  the  very 


EXISTING   SYSTEMS  OF  ORGANIZATION  69 

highest  special  talent  to  solve  his  ten-cent 
difficulty.  He  finds  this  assistance  outside  of 
his  daily  work  far  more  than  within  its  limits. 
If,  for  instance,  in  New  York  City  he  wishes 
to  transport  himself  from  the  north  end  of 
the  city  to  the  south  end,  he  offers  a  five-cent 
piece  and  finds  at  his  disposal  a  fifty-million- 
dollar  subway.  In  his  daily  work,  however, 
there  is  no  assistance.  For  his  bread-and- 
butter  task,  which  alone  makes  him  of  value 
to  others,  there  is  little  assistance  of  this 
kind. 

What  is  needed  in  organization  is  complete 
parallelism  between  line  and  staff,  so  that 
every  member  of  the  line  can  at  any  time 
have  the  benefit  of  staff  knowledge  and  staff 
assistance.  This  kind  of  organization  does 
not  exist  in  perfected  form  to-da}^  Modern 
organizations  are  defective  because  they  in- 
dividualize instead  of  generalize  their  staffs. 
The  president  of  a  railroad  or  of  a  manu- 
facturing plant  apportions  duties  among  sev- 
eral vice-presidents,  each  one  of  whom  takes 
up  a 'line  of  duties.  This  is  necessary,  but  in 
the  old  days  in  the  palace  of  Pharaoh  it  is 
not  stated  that  the  chief  butler  organized  a 
staff  with  a  head  baker,  or  that  the  chief 
baker  organized  a  staff  with  a  head  butler. 


70  EFFICIENCY  AS  A  BASIS  FOR  OPERATION" 

Each  \dce-president  of  course  requires  a  staff 
of  Ms  own  for  his  special  line  of  duties,  but 
there  are  general  needs  which  are  the  very 
fundamentals  of  strong  organization,  and 
these  needs  should  be  under  general  staff 
officers,  all  of  whose  aggregated  wisdom 
should  be  available  to  guide,  not  only  the 
president  and  the  vice-president,  but  also 
each  subordinate  official  down  to  the  lowest 
man  in  the  line.  Because  there  is  no  general 
staff  of  this  kind,  each  official  down  to  the 
worker  attempts,  more  or  less  awkwardly,  to 
create  his  own  general,  as  well  as  his  particu- 
lar, staff.  There  is  specialization  of  line 
activity,  which  is  always  advantageous,  but 
there  is  also  multiplicity  of  different  kinds  of 
general  control,  which  is  wholly  bad.  Im- 
agine an  army  to  which  each  soldier  came 
with  his  own  individual  rifle  and  ammunition 
and  kit,  in  which  each  captain  had  his  own 
system  of  tactics,  in  which  each  general  had 
his  own  special  plan  of  campaign!  Yet  this 
is  virtually  the  condition  of  railroad  and 
manufacturing-plant  organization  to-day. 
Much  of  the  time  and  energy  of  each  official 
is  taken  up  with  keeping  in  order  and  adjust- 
ing to  the  whole  his  unregulated  staff  activi- 
ties and  eccentricities.    One  of  the  defects  of 


EXISTING   SYSTEMS  OF  ORGANIZATION  71 

this  kind  of  organization  is  that  the  staffs  of 
the  different  officials  are  not  correlated.  It 
makes  no  difference  whether  the  head  of  a 
company  is  an  individual  or  a  commission, 
the  organization  is  that  of  the  line,  the  old 
military  line,  which  at  best  has  progressed  as 
far  as  monarchy  with  a  monarch's  staff. 


Chapter  IV 

LIXE   AND    STAFF    ORGANIZATION  IN   IN- 
DUSTRIAL CONCERNS 

"1 T  7ITH  full  understanding  of  the  strength 
^  ^  of  line  organization,  of  staff  organi- 
zation, and  of  their  reciprocal  advantage  to 
each  other,  and  with  a  general  comprehen- 
sion of  what  both  have  accomplished  in  the 
past,  it  becomes  possible  to  devise  and  outline 
a  modern  line  and  staff  organization  suited  to 
the  largest  industrial  concerns.  The  task 
would  be  hopeless  if  it  were  necessary  to  dis- 
place or  even  to  modify  existing  line  organi- 
zation, since  scarcely  anything  is  as  tenacious 
of  life  as  institutions.  But  happily  this  is  not 
necessary.  Von  Moltke  added  staff  to  line 
without  a  jar.  A  perfect  staff  could  be  added 
to  modern  line  and  be  self-supporting  from 
its  inception  without  a  jar. 

A  modern  company,  whether  railroad  or 
industrial,  is  organized  for  a  specific  purpose 
which  is  realized  by  an  interplay  of  men,  ma- 
72 


LINE     AXn    STAPP     OROAXIZ.VTIOX  .  •> 

chines,  materials,  and  methods.  The  specific- 
purpose  is  the  end  in  view,  but  the  interplay 
is  the  all-important  means.  AVliatever  the 
vice-president's  department,  he  has  men, 
equipment,  supplies  and  conditions  to  deal 
with.  Whatever  the  manager's  duties,  he 
also  has  men,  equipment,  materials  and  con- 
ditions to  adjust  to  one  another.  Whatever 
the  superintendent's  duties,  he  also  is  con- 
fronted with  the  same  general  jDroblems  as  to 
men,  equipment  and  tools,  materials,  and 
methods.  The  foreman  meets  the  same  prob- 
lems of  men,  materials,  machines,  and  meth- 
ods, and  even  the  individual  worker  has  also 
his  problems  of  man,  of  machine,  of  materi- 
als, and  of  methods.  It  is  evident  that  the 
most  philosophic  wa}^  to  meet  general  and 
universal  problems  is  by  general  and  uni- 
versal solution.  That  is  the  solution  offered 
by  Nature.  We  have  hands,  feet,  a  head,  and 
various  other  bodily  parts,  each  doing  various 
work,  liut  there  is  only  one  heart,  one  set  of 
lungs,  one  stomach,  one  telephone  system, 
each  doing  specific  work.  The  general  prob- 
lems, therefore,  appertaining  to  men,  to  ma- 
terials, to  machines  or  equipment,  and  to 
methods  or  conditions,  can  be  initially  di- 
vided into   four  groups.     All  four  groups, 


74  EFFICIENCY  AS  A  BASIS  FOR  OPERATION" 

which  more  or  less  interweave,  should  come 
under  one  chief  of  staff.  Under  him  should 
be  various  heads  of  staff.  The  subdivisions 
of  the  staff  depend  on  the  particular  business, 
but  a  general  scheme,  modified  to  meet  special 
conditions,  would  be  that  of  the  four  groups 
mentioned. 

As  TO  Men. 

1. — A  head  of  staff  to  plan,  direct,  and  ad- 
vise as  to  everything  appertaining  to  the 
well-being  of  the  employees.  This  is  in  itself 
a  very  extensive  and  important  department 
of  staff  activity.  Men  should  not  be  able  to 
connect  themselves  with  a  company  except 
after  examination  as  to  their  moral,  physical, 
and  professional  fitness.  Everybody  knows 
that  one  quality  of  steel  will  cut  four  or  five 
times  faster  than  some  other  quality,  and  a 
modern  tool  is  selected  not  because  it  has  the 
shape  of  a  drill,  but  because  it  is  of  a  com- 
position that  can  be  made  into  a  good  drill 
or  into  any  other  good  tool. 

Men  are  still  selected  not  on  account  of 
qualities  that  would  make  them  good  in  any 
particular  direction,  but  because  at  the  mo- 
ment they  call  themselves  this  or  that.  A 
practice  is  thus   followed  in  grading    men 


LINE    AND    STAFF    ORGANIZATION  75 

that  would  be  instantly  rejected  for  grading 
materials. 

The  line  organization  of  a  staff  head  in 
charge  of  welfare  must  extend  down  to  where 
it  is  available  with  advice  and  help  to  the 
humblest  worker.  There  is  no  reason,  for  in- 
stance, why  a  watchman,  whose  business  is  to 
look  for  bad  conditions,  should  not  combine 
the  duties  of  a  watchman  with  those  of  wel- 
fare work  and  advice.  He  would  meet  special 
cases  that  would  otherwise  escape  observa- 
tion and  report,  and  carry  them  up  to  his 
staff  superiors,  but  he  would  also  have  been 
instructed  by  his  staff  superiors  and  given 
standards  by  them  as  to  all  usual  conditions, 
so  that  he  would  have  at  his  fingers'  ends 
standards  for  the  use  of  the  workers,  stand- 
ards evolved  and  determined  by  specialists 
of  the  highest  rank. 

It  ought  to  be  as  difficult  to  enter  the  serv- 
ice of  a  great  corporation  as  to  pass  an  en- 
trance examination  to  West  Point;  but  once 
in,  it  ought  to  be  a  catastrophe  for  a  man  to 
be  forced  to  leave,  because  the  company  pro- 
vides so  much  that  he  cannot  provide  him- 
self for  his  physical,  financial,  and  profes- 
sional welfare,  because  it  rewards  individual 
efficiency. 


7G  EFFICIENCY  AS  A  BASIS  FOR  OPERATION" 

As  TO  Equipment. 

/"'  2. — A  head  of  staff  to  plan,  direct  and  ad- 
vise as  to  everything  appertaining  to  the  ad- 
justment of  structures,  machines,  tools  and 
other  equipment  to  the  work  in  hand.  There 
is  very  little  difference  between  good  han- 
dling of  equipment  and  good  handling  of  men. 
The  rules  that  apply  to  the  one  case  will  gen- 
erally ■  apply  to  the  other.  Much  has  been 
learned  about  the  proper  care  of  men  from 
methods  evolved  for  the  care  of  equipment, 
and  much  has  to  be  learned  about  the  care  of 
equipment  from  the  methods  evolved  for  the 
giiidance  of  men.  It  is  not  to  be  forgotten 
that  in  the  human  organism  the  whole  is  in- 
capacitated by  a  seemingly  slight  injury  to 
a  single  part.  No  man  will  work  efficiently 
with  a  cinder  in  his  eye,  or  a  splinter  under 
his  nail.  Neither  will  a  plant  work  efficiently 
if  little  things  go  wrong.  Single  items  of 
equipment  are  often  of  very  great  perfec- 
tion, whether  a  Corliss  engine  or  a  twist 
drill,  but  from  twist  drill  to  general  design 
and  equipment  of  plant  everything  is  usually 
wholly  out  of  relation  and  balance.  Ee- 
cently,  in  consequence  of  staff  organization, 


LINE    AND    STAFF    ORGANIZATION  77 

it  was  found  necessary  to  relocate  over  three- 
quarters  of  all  the  machines  in  two  large  and 
fairly  modern  plants.  Each  machine  had 
been  doing  good  work  by  itself,  and  no  one 
looked  further;  but  the  moment  its  relation 
to  other  machines  or  to  the  progress  of  the 
work  was  investigated,  the  conditions  at  once 
appeared  impossible  and  unbearable.  This 
relocation  of  machines,  together  with  other 
staff  reforms,  has  resulted  in  an  increase  of 
output  of  40  per  cent  without  additional  men 
for  equipment.  The  high  officials  of  every 
railroad  point  out  the  glaring  defects  of 
early  location  or  equipment — the  fact,  for  in- 
stance, that  among  1600  locomotives  owned 
by  one  road  there  were  250  different  types, 
instead  of  6.  The  earlier  builders  had  no 
staff  advice. 

This  staff  line  in  charge  of  the  use  of  equip- 
ment also  extends  down  until  it  is  within 
reach  of  the  worker.  An  example  will  show 
both  the  nature  and  the  effects  of  staff  or- 
ganization. A  staff  was  organized  on  a 
transcontinental  railroad  to  advise  generally 
as  to  the  care  and  operation  of  shop  machin- 
ery and  tools.  The  duties  of  the  staff,  which 
extended  from  the  vice-president's  office 
downwards,  were: 


78  EFFICIENCY  AS  A  BASIS  FOR  OPERATION" 

a.  To  secure  suitable  machines  and  equip- 
ment. 

h.     To  give  them  the  best  possible  care. 

c.  To  give  the  workers  advice  and  direc- 
tions as  to  how  to  use  the  equipment  most 
eiliciently. 

The  expense  of  maintaining  shop  machin- 
ery and  tools  on  this  railroad,  for  the  year 
1903-4,  was  $487,171;  the  unit  cost  in  rela- 
tion to  output  was  $10.31.  On  a  competing 
and  largely  parallel  railroad,  working  under 
similar  conditions,  the  cost  in  the  same  year 
was  $487,150,  and  the  unit  cost,  $9.55.  As  a 
result  of  staff  activity  and  control  on  the 
first  road,  by  the  year  1906-7  total  costs  had 
fallen  to  $315,844,  and  unit  costs  to  $4.89, 
but  on  the  other  road,  where  line  organization 
was  not  supplemented  by  staff  organization, 
the  total  costs  rose  to  $638,193,  unit  costs  re- 
maining virtually  constant  at  $9.81.  This 
saving  in  expenses  of  $322,000  was  brought 
about  by  a  staff  costing  less  than  $10,000,  and 
the  $10,000  is  included^in  the  $315,844. 

One  subdivision  of  this  maintenance  prob- 
lem was  the  care  of  belting.  This  had  cost  (for 
maintenance  and  renewals)  at  one  of  the 
main  shops  about  $12,000  a  year,  and  it  was 
so  poorly  installed  and  supervised  that  there 


LINE    AND    STAFF    ORGANIZATION  79 

was  an  average  of  twelve  breakdowns  every 
working  day,  each  involving  more  or  less  dis- 
organization of  the  plant  in  its  parts  or  as  a 
whole.  With  the  authority  of  the  vice-presi- 
dent and  in  conjunction  with  the  general  pur- 
chasing agent,  the  whole  subject  of  belting 
was  taken  up.  A  few  general  rules  were  laid 
down: 

a.  That  there  should  be  accurate  and  con- 
tinuous records  of  installation,  repairs,  and 
breakdowns. 

h.  That  the  installation  and  care  should 
be  delegated  to  one  trained  specialist  with 
full  authority  and  responsibility. 

G.  That  the  quality  of  the  installation  and 
operation  should  be  very  high. 

The  worker  in  actual  charge  of  belts,  a 
promoted  day  laborer,  was  given  standards, 
and  took  his  directions  from  a  special  staff 
foreman,  only  one  of  whose  duties  was  knowl- 
edge as  to  belts.  The  foreman  had  received 
his  knowledge  and  ideals  from  the  general 
chief  of  staff,  who  had  made  belts  a  special 
study,  and  this  general  chief  of  staff  had 
been  inspired  and  directed  by  a  man  who 
had  made  a  nine  years'  special  study  of  belts 
and  who  was  the  greatest  authority  in  the 
world  on  the  subject.    The  belt  foreman  had 


/ 


80  EFFICIENCY  AS  A  BASIS  FOR  OPERATION 

as  much  of  this  knowledge  at  his  call  as  he 
could  absorb,  but  he  in  turn  was  in  immediate 
contact  with  each  individual  belt,  with  the 
machine  it  was  on  and  with  the  worker  using 
the  machine.  The  chief  of  staff  learned  as 
much  from  the  belt  foreman  as  the  belt  fore- 
man learned  from  the  chief  of  staff.  The  belt 
foreman  learned  as  much  from  the  machin- 
ists as  they  learned  from  him.  The  cost  of 
maintaining  belts  fell  from  $1,000  a  month 
to  $300  a  month,  the  number  of  breakdowns 
declined  from  twelve  each  working  day  to 
an  average  of  two  a  day,  not  one  of  them 
serious,  and  even  the  few  breakdowns  were 
due  almost  wholly  to  originally  defective 
installations,  such  as  narrow  pulleys,  which 
it  was  impossible  to  remedy  without  unjusti- 
fiable expense. 

As  TO  Materials.. 

3. — A  head  of  staff  as  to  materials,  their 
purchase,  custody,  issue  and  handling.  Sub- 
sidiary materials  are  only  too  often  pur- 
chased on  the  basis  of  price  per  pound  rather 
than  on  the  basis  of  cost  per  unit.  This  is 
inevitable,  since  no  one  is  able  to  give  the 
purchasing  agent  any  standard  as  to  cost 


LINE    AND    STAFF    ORGANIZATION  81 

per  unit.  After  materials  are  purchased, 
they  are  frequently  given  such  poor  custody 
that  they  deteriorate  or  disappear  before 
being  used.  They  are  still  more  often  issued 
for  extravagant  and  wasteful  use.  The  eco- 
nomical handling  of  materials  is  a  special 
art.  Because  this  art  is  not  recognized,  be- 
cause purchase,  storage,  and  issue  of  ma- 
terials are  unscientifically  conducted,  waste, 
instead  of  economy,  is  prevalent. 

In  a  large  steel  plant,  staff  control  of 
handling  material  reduced  the  cost  of  hand- 
ling per  ton  from  $0,072  to  $0,033,  and  in- 
creased the  number  of  tons  handled  per  man 
per  day  from  16  to  57.  Here  again  was  the 
same  kind  of  staff  organization,  calling  down 
from  the  top  all  the  most  valuable  knowledge 
in  the  world  as  to  this  one  subject,  working 
up  from  the  bottom  from  actual  daily  con- 
tact with  changing  conditions. 

There  is  no  logical  difference  between 
money  spent  on  materials  and  money  spent 
for  labor.  A  brick  wall  is  a  combination  of 
labor  and  of  material.  Every  issue  of  ma- 
terial, every  issue  of  labor,  should  be  stand- 
ardized in  advance  and  checked;  the  same 
system  of  accounting  and  distribution  should 
be  used  for  both  labor  and  material. 


83  EFFICIENCY  AS  A  BASIS  FOR  OPERATION 

As  TO  Methods  and  Conditions. 

^  4. — A  staff  head  as  to  conditions  and  meth- 
ods, including  standards,  records,  and  ac- 
counting. It  has  been  found  practically  im- 
possible to  maintain  either  standards  or  rec- 
ords unless  they  are  tied  into  the  accounting. 
This  is  because  they  are  standards  as  to 
money  entries  and  none  as  to  times  or  per- 
formances. This  does  not  imply  that  records 
or  standards  shall  be  an  outgrowth  of  ac- 
counting. Either  is  quite  as  important  as 
accounting,  and  if  a  choice  had  to  be  made 
between  good  accounting  coupled  with  bad 
practice  and  good  practice  coupled  with  bad 
accounting,  most  practical  men  would  choose 
good  practice.  It  is  because  at  the  present 
time  good  accounting  is  unrelated  to  good 
practice  that  extensive  accounting  is  viewed 
with  such  extreme  disfavor  by  the  practical 
man.  Standards  are  wholly  distinct  from 
accounting,  records  are  wholly  distinct  from 
accounting,  but  all  three  gain  greatly  when 
tied  in  together.  It  is  impossible  to  maintain 
records  unless  there  are  standards  of  per- 
formance, but  these  can  never  be  evolved 
from  either  records  or  accounting.    The  de- 


LINE     AND     STAFF    ORGANIZATIOX  83 

termination  and  establishment  of  standards 
is  a  peculiar  art,  yet  one  of  fundamental  im- 
portance, for,  without  a  mean  sea-level  from 
which  to  start  there  is  no  measuring  of  moun- 
tains or  of  absolute  heights.  Railroads  and 
industrial  plants  have  systems  of  accounting 
based  on  the  same  general  plan,  but  their 
records  are  often  not  of  the  same  facts,  so 
that  it  is  difficult,  if  not  impossible,  to  com- 
pare performances  on  one  railroad  with  those 
on  another  railroad.  There  are  certain  rec- 
ords at  the  top,  there  is  occasionally  a  cer- 
tain semblance  of  a  record  at  the  bottom, 
but  between  the  bottom  record,  on  which, 
after  all,  everything  rests,  and  the  toja  record 
which  is  supposed  to  reveal  the  condition  of 
the  company,  everything  is  vague  and  discon- 
n3cted.  It  is  astonishing,  almost  pathetic, 
that  presidents'  reports  and  Wall  Street  pub- 
lications solemnly  print  costs  per  locomotive 
mile  or  cost  of  fuel  per  1,000  ton  miles,  when 
the  initial  records  out  of  which  the  final  re- 
ports are  built  up  are  wholly  unstandardized. 
With  a  staff  specialist  on  records,  with  rec- 
ord specialists  under  him  reaching  down  into 
intimate,  hourly  and  departmental  touch  with 
the  worker,  every  gang  boss,  every  worker 
could  confide  to  him  his  desires  and  his  needs. 


84  EFFICIENCY  AS  A  BASIS  FOR  OPERATION 

A  good  record  may  increase  the  output  of 
the  machinist  quite  as  effectively  as  a  good 
belt  or  tool,  as  good  material;  and  when 
the  worker  needs  help  of  this  kind  he  should 
have  it  at  hand,  I  knew  a  worker  on  time 
allowance  for  every  job.  The  company  was 
satisfied  with  100  per  cent  efficiency,  but  this 
particular  worker  had  set  himself  a  standard 
of  120  jDer  cent,  his  earnings  depending  on 
his  monthly  efficiency.  To  attain  this  he  could 
not  afford  to  lose  track  as  to  any  single  day; 
he  had  to  know,  in  fact,  how  he  stood  as 
to  every  job  during  the  day.  He  therefore 
needed  a  record  of  both  his  standard  and  ac- 
tual time.  An  ambition  of  this  kind  is  of 
extreme  value  to  the  company,  not  only  be- 
cause it  decreases  the  cost  and  increases  the 
output  and  reliability  of  the  man,  but  because 
of  its  effect  on  all  the  other  workers.  This 
man  made  out  his  own  records,  on  awkward 
and  unsuitable  blanks,  and  they  were  kept 
in  such  a  way  as  not  to  fit  in  with  or  be  of 
any  value  to  the  general  scheme.  Here  was 
a  case  where  the  desire  of  the  worker  could 
well  have  been  assisted  by  the  skill  of  the 
specialist,  each  learning  much  from  the  other 
and  together  evolving  a  form  of  record  of 
universal,  optional  use.     Had  any  question 


LINE    AND    STAFF    ORGANIZATION  85 

come  up  beyond  the  skill  or  the  authority  of 
the  local  record  man,  he  could  have  taken  it 
up  with  his  superiors  until  it  had  met,  and 
been  solved  by,  the  grade  of  talent  required. 
Standards  of  performance  are  not  less  of 
a  general  character  than  records.  In  rail- 
road operr'^'on  the  only  work  which  is  accom- 
plished in  a  definite  predetermined  time  is 
the  running  of  the  passenger  trains.  The 
Pennsylvania  Eailroad,  for  instance,  reports 
that  it  ran  its  18-hour  train  from  New  York 
to  Chicago  312  days  out  of  366  exactly  on 
time,  an  arrival  efficiency  of  85.24  per  cent. 
In  April,  1908,  the  Chicago  train  arrived  in 
New  York  28  days  out  of  30,  or  93.33  per  cent 
on  time,  being  on  one  of  the  two  days  only  1 
minute  late.  Probably  this  train  runs  with 
a  time  accuracy  of  99.9  per  cent  if  one  should 
add  up  all  the  standard-time  minutes  in  the 
year  and  divide  by  the  actual  time  taken.  Per- 
haps the  Pennsylvania  Railroad  keeps  similar 
efficiency  check  on  other  passenger  trains,  but 
how  about  all  its  other  items  of  expense  in- 
curred for  either  material  or  time?  Do  they 
also  show  99  per  cent  efficiency  or  would  they 
show  about  60  per  cent  efficiency?  If  stand- 
ards were  established,  if  records  were  kept, 
it  would  be  possible  soon  to  attain  almost 


86  EFFICIENCY  AS  A  BASIS  FOR  OPERATION 

automatically  the  same  liigli  efficiency  as  is 
now  shown  in  the  18-hour  train.  It  has  cost 
Hione}^,  a  great  deal  of  money,  to  run  the 
18-hour  train  as  efficiently  as  it  runs.  It 
would  save  money,  a  great  deal  of  money,  to 
run  other  operations  on  a  100  per  cent 
schedule. 

Both  accounting  and  records  are  very 
greatly  simplified  when  connected  up  with 
standards.  When  the  housewife  buys  a 
pound  of  tea  or  of  meat  she  hands  over  the 
money  and  she  receives  in  return  a  definite 
and  agreed-upon  equivalent  in  weight.  This 
is  exactly  what  the  railway  company  or  the 
manufacturing  concern  does  not  do  when  it 
pays  for  services.  The  company  does  not 
even  know  what  it  ought  to  receive  as  service 
in  return  for  the  money  paid,  and  so  it  ac- 
cepts, not  what  it  ought  to  receive,  but  what 
the  payee  gives,  generally  much  less  than  it 
is  entitled  to. 

The  result  of  perfected  staff  organization 
is  that  everything  is  well  and  quickly  done 
when  and  where  wanted,  that  all  costs  are 
predetermined,  that  the  responsibility  for 
any  deviation  is  immediately  located,  that  the 
heads  of  both  line  and  staff  can  direct  far 
better  than  they  are  now  able  to,  that  costs  of 


LINE    AND    STAFF    ORGANIZATION  87 

performance  decrease,  and  that  output  from 
the  same  equipment  and  men  increases.  The 
staff  is  to  the  line  what  the  good  road  is  to 
the  automobile.  Without  it  neither  speed 
nor  smooth  running  nor  economy  is  attain- 
able. 


Chaptee  V 

STANDAEDS;    THEIE    EELATIO^Tg    TO    OE- 
GANIZATION  AND  TO  EESULTS 

pRESEEVATION  and  perpetuation  are 
-■'       two  of  Nature's  most  important  laws; 

^-^therefore  line  organization,  wliieh  is  self-per- 
petuating,/is  essential,  it  being  unimportant 
whether  tlie  chief  and  officers  of  the  line  are 
individuals  or  commissions  or  a  semi-staff. 

/  Line  organization,  from  its  nature,  will  al- 
ways be  mediocre  and  inefficient  unless  han- 
dled by  an  extraordinary  genius  like  Na- 
poleon. The  mediocrity  is  not  one  of  indi- 
viduality but  of  organization.  Promotion 
is  not  by  merit,  since  this  would  destroy  the 
essential  feature  of  line  (its  property  of 
self-perpetuation),  but  advancement  is  by 
seniority.  The  youngest  member  is  as  ca- 
pable potentially  as  the  highest,  and  whether 
he  rises  to  supreme  command  in  five  years 
or  in  forty-five  depends  on  opportunity. 
When  he  has  reached  the  age  of  retirement 

88 


STANDARDS  89 

he  gives  way  to  a  junior  as  one  day  gives  way 
to  another.  There  was  nothing  worth  pre- 
serving, and  the  elimination  of  the  temporary 
head  produces  a  desirable  wriggle  of  life  all 
the  way  down  the  line. 

Line  organization  needs  few  standards,  ^ 
usually  crude  and  often  fictitious.  Seniority 
or  precedence  is  one  of  its  standards,  and 
closely  interwoven  is  the  fundamental  stand- 
ard of  immediate  and  unquestioning  obedi- 
ence almost  as  automatic  as  the  obedience  of 
sheep  to  the  leader.  This  simplicity  of  stand- 
ards eliminates  mental,  moral,  and  physical 
perplexity.  A  chief  of  line  may  have  many 
personal  standards.  He  may  not  permit  men 
to  be  recruited  for  liis  guard  unless  seven 
feet  tall,  the  idiosyncrasy  of  the  first  king  of 
Prussia,  or  he  may  uniform  them  in  tall  bea- 
vers and  scarlet  coats,  or  he  may  dress  them 
like  cowboys,  and  call  them  rough  riders,  or 
as  in  the  German  and  French  and  Russian 
armies  there  may  be  most  punctilious  stand- 
ards imposed  as  to  dueling. 

Line  organization  can  be  defined  as  a  self-  ' 
perpetuation  of  a  good  average  with  the  one 
standard  of  obedience. 

Because  it  is  the  exact  opposite,  staff  is  a  ^ 
strengthener  to  line.    It  is  not  self-perpetu- 


90  EFFICIENCY  AS  A  BASIS  FOR  OPERATION 

ating,  but  distinctly  selective.  The  youngest 
captain  in  the  German  army  assigned  for 
staff  duty  is  perhaps  the  highest  special 
authority  on  aeroplanes.  Promotion  is  not 
upwards  but  outwards,  just  as  the  Wright 
brothers,  who  began  by  specializing  on  aero- 
planes in  their  home  field  in  Ohio,  are  now 
the  recognized  authorities  in  the  United 
States,  France,  England  and  Germany — in 
aeroplanes,  but  in  nothing  else. 

Instead  of  there  being  one  main  standard, 
obedience,  causing  no  perplexity — instead  of 
subsidiary  fanciful  standards — there  is  an 
unlimited  multiplication  of  scientific  stand- 
ards, higher  than  all  personality.  The  mem- 
ber of  the  line,  whether  in  church,  state,  army 
or  navy,  must  obey  blindly  and  implicitly. 
The  staff  expert  receives  from  his  chief  prin- 
ciples which  are  higher  than  the  chief,  since 
they  are  part  of  the  eternal  laws  of  the  uni- 
verse. The  bookkeeper's  standard  is  that 
two  and  two  are  four,  not  three  nor  five,  and 
no  command  of  chief  justifies  him  in  depart- 
ing from  this  standard.  His  chief  may  tell 
him  that  a  pound  of  carbon  burned  to  C  0= 
evolves  14,500  B.  t.  u.,  or  that  the  mechanical 
equivalent  of  heat  is  772  foot  pounds  or  778 
foot  pounds.     He  may  by  his  own  expert- 


STAXDARDS  91 

ments  determine  the  former  at  14,146  and  the 
hitter  for  his  own  latitude  at  777,  and  it  is 
the  duty  of  the  chief  to  accept  the  new  stand- 
ard if  verified.  The  line  has  always  justified 
its  standard  of  obedience  to  human  authority 
by  attempting  to  derive  the  human  authority 
from  Heaven — the  divine  right  of  kings,  the 
keys  of  heaven  and  hell  entrusted  to  St. 
Peter,  the  inspired  Scriptures. 

Staif  standards  are  based  on  specific  hu-; 
man  authority  onh^  until  new  facts  substitute 
better  authority.  The  chief  of  staff  furnishes 
general  and  approximate  standards,  a  subor- 
dinate staff  specialist  establishes  closer  and 
more  accurate  standards. 

Staff  standards  are  not  theological  abstrac- 
tions, but  scientific  approximations,  and  are 
evolved  for  the  use  of  the  line,  the  sole  justi- 
fication of  the  standards  being  that  they  will 
make  line  work  more  efficient.  Staff  stand- 
ards being  for  the  benefit  of  the  line  and 
often  entrusted  to  line  officials,  must  be  put  in 
the  form  of  permanent  instructions  so  that  all 
may  understand  what  is  being  aimed  at,  and 
deviations  by  the  line  be  noted  and  repri- 
manded. 

During  the  Cuban  campaign,  in  a  road  over 
which  many  hundred  army  wa2:ons  were  to 


92  EFFICIENCY  AS  A  BASIS  FOR  OPERATION 

pass,  there  was  a  mud  hole.  The  first  trans- 
port wagon,  obeying  the  command  to  proceed 
to  destination,  floundered  into  the  hole,  had 
to  be  unloaded,  dragged  out,  and  reloaded. 
The  crew  had  neither  authority,  skill,  nor 
equipment  to  mend  roads,  so  they  passed  on. 
Also  there  were  no  written  staff  instructions 
as  to  what  a  line  official  should  do  when  he 
found  the  road  impassable,  so  the  second 
wagon  coming  along  a  few  hours  later, 
plunged  into  the  same  hole  and  experienced 
the  same  delay  and  trouble.  In  turn  each  of 
the  several  hundred  wagons  repeated  the 
same  performance,  and  although  this  road 
was  in  constant  use  for  several  months  no 
attempt  was  made  to  mend  it.  Had  there 
been  as  much  sense  of  staff  as  in  ant-hill  ac- 
tivities, the  first  wagon  would  not  have 
passed  on  without  bettering  the  conditions 
for  those  who  follow,  instead  of  leaving  them 
worse ;  had  there  been  even  elementary  staff, 
one  wagon  only  would  have  gone  into  the 
hole,  which  would  then  as  a  matter  of  course 
have  been  eliminated.  Had  there  been  per- 
fected staff,  even  the  first  wagon  would  not 
have  passed  over  the  road  until  it  had  been 
put  in  condition. 

A   sign   post    definitely    stating   distance. 


STANDARDS  93 

character  of  road,  steepness  of  grades,  to 
next  town,  is  not  in  any  way  an  imposition  on 
or  an  impediment  to  the  wayfarer,  whether 
on  foot  or  in  automobile,  but  is  a  valuable 
help.  The  sign  post  is  a  staff,  without 
authority,  except  as  imjDOsed  on  the  line  by 
a  line  officer,  a  staff  without  value  except  as 
to  its  own  special  and  limited  information. 

Staff  standards  are  infinite  and  ever 
changing.  The  best  practice  of  yesterday  is 
the  laughing  stock  of  today.  The  work  of 
the  expert  is  never  done.  The  aeroplane  flight 
of  6  miles  last  year  becomes  60  miles  tliis 
month,  600  miles  next  year.  The  chief  of 
staff,  who  is  to  inspire  the  search  for  higher 
standards,  who  is  to  handle  them  with  com- 
mon sense,  must  himself  be  governed  by  ele- 
mental natural  truths — his  standards,  used  as 
a  test  for  all  the  others — and  these  highest 
standards  are  psychical  and  psychological 
rather  than  physical.  The  four  psychological 
requisites  for  a  chief  of  staff  are :  (a)  Faith, 
in  men,  in  equipment,  in  methods,  and  in 
standards,  (b)  an  enthusiasm  that  inspires 
and  creates  confidence,  (c)  ultimate  highest 
ideals,  (d)  very  great  rapidity  of  action. 

Faith  in  men,  faith  in  equipment,  faith  in 
methods,  faith  in  standards,  must  be  so  great 


94  EFFICIENCY  AS  A  BASIS  FOR  OPERATION 

as  to  inspire  a  contagious  entliusiasm  not 
only  in  the  junior  staff  members  but  also  in 
all  the  members  of  the  line  from  commander- 
in-chief  down  to  private.  No  man  is  fit  to 
be  a  member  of  a  staff  who  does  not  delight 
in  his  work,  who  does  not  consider  it  the  key- 
stone of  the  arch,  who  does  not  bend  it 
wholly  to  the  interests  of  the  line,  so  that  the 
line  will  recognize  that  through  staff  pres- 
ence and  staff  endeavor,  line  work  is  made 
safer,  higher,  more  pleasurable  and  more 
profitable. 

The  chief  of  staff  must  believe  that  the 
great  majority  of  employees,  nine-tenths,  at 
least,  can  be  easily  influenced  to  do  what  is 
right,  and  prefer  to  do  what  is  right,  and  that 
if  the  right  course  is  made  easy,  it  will  be 
automatically  followed,  just  as  most  people 
naturally  keep  to  the  sidewalk,  although 
there  are  no  rules  ordering  them  to  do  so. 
Policemen  are  armed  with  clubs  not  to  intimi- 
date the  well-behaved  many  but  to  terrorize 
the  exceptional  few.  After  the  first  preju- 
dice against  any  innovation  is  overcome,  staff 
standards  must  continually  appeal  to  those 
for  whom  they  are  set  up. 

The  chief  of  staff  must  assume,  until  the 
contrary  is  proved,  that  existing  equipment 


STANDARDS  95 

and  existing  facilities  utilized  to  fullest  effi- 
ciency can  meet  most  requirements ;  that  it  is 
better  to  improve  than  to  substitute ;  that  Go- 
liath can  be  slain  with  a  sling,  and  that  the 
western  road  to  India  can  be  discovered  with 
a  caravel. 

No  man  is  fit  to  be  either  chief  of  staff  or 
staif  junior  who  does  not  have  and  adhere 
to  high  ideal  standards.  This  fidelity  to 
principles  is  necessarily  foreign  to  the  line. 
A  type  setter  is  a  member  of  the  line.  He 
achieves,  obediently  following  the  manu- 
script; but  the  proofreader  is  a  member  of 
the  staff  and  maintains  standards.  Between 
them  perfect  work  is  turned  out. 

The  chief  of  staff  and  all  his  juniors  must 
be  alive  to  the  value  of  rapidity  of  action. 
Seconds,  minutes,  hours  and  days  are  to  the 
staff  what  hours,  days,  months  and  years  are 
to  the  line.  Staff  ideals  of  the  value  of  rapid- 
ity are  found  in  the  instantaneous  action  of 
a  boxer  or  fencer,  where  delay  of  the  hun- 
dredth part  of  a  second  to  meet  an  ex- 
pected condition  may  result  in  death;  are 
found  in  the  activities  of  the  weather  serv- 
ice, which  receives  reports  from  territory 
6,000,000  miles  in  extent,  compiles  and  di- 
gests the  information,  and  publishes  tomor- 


96  EFFICIENCY  AS  A  BASIS  FOR  OPERATIOX 

row's  weather  before  noon  today,  to  all  the 
world  over,  land  and  sea;  a  delay  of  a  few 
hours  would  make  the  whole  work  valueless. 
Staff  ideals  of  speed  reacting  on  all  the  line 
are  found  in  the  work  of  a  daily  paper,  which 
collects  the  news  of  the  whole  world  until 
the  night  is  half  gone,  goes  to  press  at  two 
in  the  morning,  and  reaches  distant  custom- 
ers at  6  a.  m. 

A  proposition  was  made  to  the  line  officers 
of  a  large  corporation  to  reduce  expenses 
$2,000,000  per  annum.  Whatever  the  time  re- 
quired to  accomplish  this,  every  day's  delay 
caused  an  irretrievable  loss  of  $6,666;  yet 
details  that  ought  to  have  been  decided  in  8 
minutes  were  allowed  to  wait  for  8  months. 
Line  traditions  vitiated  staff  ideals,  and  as 
the  line  lasts  forever  it  is  not  imbued  with 
speed  ideals.  It  was  quite  i'n  accordance  with 
line  tradition  that  the  wars  between  France 
and  England  lasted  100  years,  that  the  reli- 
gious wars  in  Germany  lasted  30  years,  that 
the  wars  of  Frederick  the  Great  lasted  7 
years,  that  the  French  European  wars  lasted 
26  years,  that  the  war  of  the  American  revo- 
lution lasted  7  years,  the  war  of  the  Rebellion 
4  years — but  that  the  staff-prepared  war  of 
VonMoltke's  Prussian  army  against  twice  as 


STANDARDS  9'J' 

strong  a  territorial  and  numerical  coalition 
lasted  2  weeks,  and  Von  Moltke's  staff-pre- 
pared war  of  Germany  against  France  cap- 
tured the  French  emperor  and  the  French 
armies  and  ended  the  French  empire  in  7 
weeks  after  outbreak. 

In  line,  there  is  very  little  planning  but  a 
great  deal  of  organization;  in  staff,  it  is  all 
planning  and  very  little  organization. 

Owing  to  absence  of  staff  as  part  of  their 
own  organization,  lines,  all  over  the  world, 
have  been  forced  to  depend  on  outside  staffs, 
whose  inspiration  was  generally  tinged  with 
pecuniary  self-interest,  so  that  the  great 
shops  and  railroads  and  other  industrial  con- 
cerns have  been  as  to  men,  machines,  mate- 
rials, and  methods  over-supplied  and  over- 
equipped, as  when  a  $100,000  saw  mill  is 
erected  to  handle  a  $50,000  lumber  tract. 
Many  hundred  million  dollars  have  been 
spent  in  the  last  decade  on  fanciful  better- 
ments, when  greater  returns  could  have  been 
obtained  by  standardizing  what  was. 

In  marked  contrast  to  the  lavish  expendi- 
ture for  inadequate  returns  from  improve- 
ments in  industrial  and  transportation  con- 
cerns is  the  small  expenditure  and  enormous 
return  brought  about  in  agriculture.     The 


98  EFFICIElfCY  AS  A  BASIS  FOR  OPERATION 

present  depression  in  tlie  great  industrial 
division  of  American  activity  and  the  almost 
giddy  prosperity  of  the  agricultural  division 
at  once  illustrate  the  fundamental  difference 
in  results  and  in  methods  obtained  from 
line  and  staff  activities  respectively.  The 
farmer  is  not  lazy,  he  is  not  troubled  by  union 
limitations,  and  he  has  the  enormous  spur  of 
direct  and  personal  increase  of  reward  for 
increased  or  more  intelligent  effort;  he  has 
moreover  been  at  his  business  from  birth; 
but  the  average  result  in  crops  is  only  about 
30  per  cent  of  what  it  ought  to  be. 

There  is  no  reason  for  assuming  that  in- 
dustrial activities,  entrusted  to  men  whose 
interest  goes  no  further  than  their  daily 
wage,  who  were  not  born  to  the  business,  will 
average  any  higher  in  efficiency  than  the 
farming  class,  and  in  fact  there  is  just  as 
much  difference  between  the  average  crop 
and  the  expert's  crop  as  there  is  between  the 
average  output  of  a  man  and  machine  and  the 
expert's  output  from  the  same  man  and  ma- 
chine. Two  different  influences  are  revolu- 
tionizing agriculture — the  isolated  special 
genius,  and  the  staff  adviser.  The  industrial 
field  has  had  the  isolated  special  genius  but 
as  yet  very  little  staff  assistance. 


STANDARDS  99 

Because  these  essays  on  efficiency  are  ap- 
plicable particularly  to  shops  and  railroads 
it  is  better  to  use  illustrations  from  agricul- 
ture, since  it  is  much  easier  to  see  the  mote 
in  the  brother's  eye  than  the  beam  in  our  own. 
Therefore  the  yield  of  potatoes  will  be  used 
in  illustration.  What  is  the  limit  of  yield  of 
potatoes  from  an  acre  of  ground  in  the  Uni- 
ted States  1  The  average  yield  per  acre  over 
a  series  of  years  is  96  bushels.  Shall  we, 
therefore,  set  100  bushels  as  standard  100 
per  cent  efficiency? 

The  lowest  average  in  1907,  65  bushels, 
occurred  in  the  great  agricultural  State  of 
Kansas ;  the  highest  average  was  in  the  des- 
ert State  of  Wyoming,  200  bushels  to  the 
acre.  The  highest  average  in  Wyoming  is 
due  to  one  man,  who  issued  a  challenge  of 
$1,000  open  to  all  the  potato  growers  of  Colo- 
rado, that  he  would  raise  on  his  Wyoming 
farm  more  potatoes  per  acre  than  any  one 
could  raise  in  Colorado,  provided  further 
that  if  he  won  the  contest  yet  failed  to  raise 
1,000  bushels  per  acre,  he  would  forfeit  the 
whole  of  the  stakes,  $2,000  to  charity. 

It  is  psychology,  not  soil  or  climate,  that 
enables  a  man  to  raise  five  times  as  many 
i:)otatoes  per  acre  as  the  average  of  his  own 


100         EFFICIENCY  AS  A  BASIS  FOR  OPERATION 

State,  ten  times  as  many  per  acre  as  the  av- 
erage of  the  United  States,  thirteen  times  as 
many  as  the  average  in  the  better  soil  and 
climate  of  Kansas.  An  easily  attainable 
standard  of  potato  raising  is  therefore  not 
100  bushels  but  500  bushels,  which  can  be 
called  100  per  cent  efficiency. 

On  this  basis  the  average  of  the  United 
States  is  19  per  cent,  the  average  of  Kansas 
12  per  cent,  the  production  of  the  Wyoming 
champion  200  per  cent  efficiency.  If  the  Uni- 
ted States  attained  as  to  potato  raising  an 
average  efficiency  of  50  per  cent,  the  in- 
creased value  of  the  crop  in  one  year  would 
be  sufficient  to  pay  for  the  Panama  Canal; 
or,  the  acreage  and  labor  devoted  to  potatoes 
could  be  reduced  to  40  per  cent  of  what  it  now 
is,  and  still  yield  as  many  potatoes. 

Undoubtedly  the  potato  champion,  in  a 
more  favorable  climate,  where,  with  irriga- 
tion, three  crops  are  possible,  as  in  the  Yaqui 
Valley  in  Mexico,  would  raise  3,000  bushels 
per  year  per  acre.  They  would  cost  him  more 
per  acre  but  less  per  bushel  than  any  other 
potatoes  in  the  world. 

Individuals  of  tliis  hind  have  inspired  the 
Agricultural  Department  at  Washington, 
working  in  conjunction  with  State  agricul- 


STANDARDS  lOl 

tural  staffs,  to  standardize  conditions  for  all 
staple  agricultural  products. 

It  lias  recently  been  asserted  that  with  se- 
lected seed  a  standard  attainable  yield  of 
wheat  is  50  bushels  per  acre  per  year.  The 
actual  jdeld  is  14  bushels ;  the  total  650,000,- 
000,  when  it  ought  to  be  2,500,000,000  bush- 
els— yet  there  are  charity  bread  lines  in 
New  York. 

With  a  standard  of  50  bushels  per  acre 
the  efficiency  average  of  the  United  States  is 
only  28  per  cent,  the  money  loss  at  constant 
price  over  $1,000,000,000  per  year. 

The  staff  experts  of  the  Agricultural  De- 
partment have  enabled  Texas  cotton  growers 
to  raise  one  bale  per  acre.  Selected  seed, 
suitable  fertilizer,  systematic  cultivation  are 
all  that  is  required.  The  acreage  of  cotton  is 
32,000,000,  the  production  only  12,000,000 
bales;  the  efficiency  is  17.5  per  cent  and  the 
annual  loss  due  to  inefficiency  about  $1,000,- 
000,000. 

Italian  bees  in  California  raise  twice  as 
much  honey  as  they  do  in  Italy.  The  Cali- 
fornia bees  do  not  work  as  hard;  they  live 
longer  because  most  of  the  disagreeable  work 
is  eliminated.  The  staff  experts  advising  the 
bees  are  men  who  standardize  bee  work  both 


103         EFFICIENCY  AS  A  BASIS  FOR  OPERATION 

simply  and  effectively.  The  bees  make  honey 
instead  of  wasting  time  on  hives,  on  foun- 
dations, on  comb,  and  on  long  jonrneys  to 
semi-barren  flower  fields. 

The  potato  expert  increased  the  efficiency 
of  his  fields  to  ten  times  the  average ;  the  corn 
and  cotton  staff  experts  have  through  their 
advice  enabled  whole  counties  of  farmers 
to  double  the  average  ^ield  of  corn  and  cot- 
ton; the  making  of  better  conditions  has 
increased  the  average  yield  of  honey  100 
per  cent. 

If  we  could  put  ourselves  in  touch  with 
the  feelings  of  plants  we  should  probably 
find  that  there  was  much  more  enjoyment  to 
potatoes  in  growing  1,000  bushels  to  the  acre 
than  in  growing  67  to  the  acre.  Intensity  of 
production  does  not  mean  physical  exhaus- 
tion, but  favorable  conditions.  Similarly,  in- 
tensity of  human  production  does  not  legiti- 
mately mean,  and  ought  never  to  mean,  the 
physical  exhaustion  of  an  over-worked  vic- 
tim, but  should  be  due  to  the  joyous  stimulus 
of  perfectly  standardized  conditions./' 

Examples  from  agriculture  have  been  se- 
lected because  far  more  has  been  done  to 
establish  standards  of  attainable  produc- 
tion in  agriculture  than  to  establish  standards 


STANDARDS  103 

in  factories,  shops,  and  mechanical  trades. 
The  plant  also  will  always  do  the  best  that 
circumstances  permit,  and  the  circumstances 
are  largely  controllable.  A  man  will  rarely 
do  his  best,  even  if  circumstances  are  favor- 
able ;  but  as  an  offset  it  is  more  easy  to  con- 
trol factory,  transportation,  shop,  and  hand- 
work conditions  than  to  control  seasons,  cli- 
mates, diseases,  and  insect  pests.  On  the 
whole,  the  efficiencies  of  industrial  organiza- 
tions are  no  higher  than  those  of  farming  ac- 
tivities, and  as  staff  standards  indicate  pos- 
sible increases  of  200  per  cent  in  agricultural 
yields,  so  staff  standards  and  staff  assistance 
will  bring  about  200  per  cent  increased  effi- 
ciency in  materials  and  services  in  industrial 
organizations,  including  railroads.  Tests 
show  that  this  can  be  done. 

The  standardizing  of  belt  practice  by  staff 
study  has  increased  the  average  life  of  belt- 
ing more  than  six-fold,  has  reduced  belt  fail- 
ures to  one-sixth  of  what  they  were,  has  de- 
creased annual  cost  to  less  than  one-seventh 
of  what  it  was. 

The  discovery  and  perfection  of  high-speed 
steels  did  not  originate  in  any  shop,  but  was 
exclusively  developed  by  men  whose  ideals 
and  practices  were  those  of  the  staff,  and 


104         EFFICIENCY  AS  A  BASIS  FOR  OPERATION 

liigii-speed  steel  accomplislies  four  or  five 
times  as  much  as  the  old  carbon  steel. 

Staff-selected  and  designed  abrasive 
wheels  cut  four  times  as  fast  as  the  old  grind- 
stones, and  every  grade  needed  can  be  made 
to  order,  standardized  for  each  different  kind 
of  work;  files  that  are  standardized  as  to 
quality  last  five  times  as  long  as  the  usual 
good  commercial  files  and  cut  much  faster. 

Wherever  the  staff  expert  turns,  he  finds 
that  standard  time  and  cost  for  some  units 
of  work  can  be  reduced  to  one-half,  for  other 
units  to  one-quarter,  occasionally  to  one- 
tenth  of  the  average  time  for  the  unstandard- 
ized  work. 

Eailroad  practice  has  many  standards, 
chiefly  those  of  specification,  of  construction, 
and  of  times  for  passenger  trains.  No  rail- 
road has  ever  determined  any  cost  standards 
either  for  maintenance  or  operation  of  equip- 
ment, maintenance  of  way,  or  consumption  of 
fuel;  yet  there  is  no  railroad  in  the  country 
on  which  each  one  of  these  cost  standards 
could  not  be  determined  in  a  very  short  time 
and  with  very  close  accuracy,  at  a  cost  equal 
to  the  saving  effected  in  a  single  month. 

When  each  unit  of  locomotive  repair  is 
standardized,  the  sum  of  the  units  shows  a 


STANDARDS  105 

cost  between  $0.03  and  $0.06  a  mile  for  main- 
tenance. The  actual  average  costs  on  the 
railroads  are  between  $0.06  and  $.12 — there- 
fore twice  what  they  ought  to  be.  The  stand- 
ardized cost  of  maintaining  freight  cars 
is  as  low  as  $30  per  annum.  Actual  average 
costs  run  from  $45  on  some  roads  to  over 
$100  on  others.  Standards  of  maintenance 
of  way  vary,  but  innumerable  assays  of  ac- 
tual work  show  a  maintenance-of-way  labor 
efficiency  of  scarcely  more  than  30  per  cent. 

Staff  determinations  with  a  djiiamo  car 
showed  that  1,000,000  B.  t.  u.  in  the  coal  were 
amply  sufficient  to  furnish  power  to  move  a 
1,000-ton  train  one  mile.  The  actual  coal 
charged  to  locomotives  always  contained 
more  than  twice  as  many,  often  three  times 
as  many,  B.  t.  u. 

The  average  mileage  of  the  locomotives 
of  the  United  States  is  close  to  30,000  per 
year,  about  82  miles  per  day.  Average  mile- 
age of  a  freight  car  is  about  25  miles  per 
day.  Staff  standardization  in  locomotive  re- 
pairs not  only  decreases  the  cost  to  one-half 
as  much  per  mile,  but  also  increases  the 
mileage  at  least  33  per  cent. 

Locomotive  repairs  cost  twice  what  they 
should,  not  because  men  in  charge  are  not  of 


106         EFFICIENCY  AS  A  BASIS  FOR  OPERATIOX 

the  highest  ability  and  experience,  but  be- 
cause these  men  are  so  hampered  by  line 
organization  that  it  is  almost  impossible  for 
them  to  evolve  standards  or  to  maintain 
standards  when  evolved.  Standards  are  al- 
ways of  the  microscope,  of  the  assayer's 
balance,  of  infinite  patience  applied  to  the 
smallest  of  details.  It  is  not  important  that 
absolute  zero  is  at  — 273  degrees  and  that  the 
highest  temperature  in  the  sun  is  10,000  de- 
grees, but  it  is  important  that  human  life  is 
snuffed  out  if  the  temperature  of  the  body 
rises  5  degrees  centigrade. 

It  is  not  important  that  space  is  so  vast 
that  it  takes  hundreds  of  years  for  the 
light  of  distant  stars  to  reach  us — wireless 
telegraphy  on  a  stupendous  scale — but  it  is 
important  that  the  yellow-fever  bacillus  may 
lurk  in  the  saliva  of  a  mosquito,  so  small  that 
the  microscope  has  scarcely  yet  discovered  it. 

It  is  not  important  that  pressure  varies 
from  notliing  in  vacuo  to  so  much  at  the 
deepest  spots  in  the  sea  that  an  air  bubble 
taken  down  there  becomes  heavier  than 
water  and  cannot  rise  to  the  surface,  to 
so  much  at  the  earth's  center,  even  if  there 
were  free  opening  to  the  surface,  that  the 
air  would  be  heavier  than  gold,  harder  than 


STANDARDS  107 

titanium,  so  that  a  needle  could  not  be  driven 
into  it,  yet  if  in  it,  would  slowly  move  surface- 
wards  until  specific  oravity  of  air  and  needle 
were  the  same.  These  facts,  interesting 
though  they  are,  do  not  concern  us  as  much 
as  the  fact  that  men  cannot  work  on  high 
mountains  without  danger  nor  in  caissons 
without  risk  of  the  ''bends,"  and  that  half 
the  power  put  into  air  compression  is  lost 
in  pipe  leaks. 

The  staff  chief  and  his  assistants  in  search 
of  standards  are  not  using  bolometers  to 
measure  the  ten  thousandth  part  of  a  degree, 
nor  the  spectroscope  to  measure  the  speed  of 
advance  or  recession  of  the  fixed  stars,  nor 
ruling  diffraction  gratings  900,000  lines  to  an 
inch,  nor  are  they  interested  in  either  the 
North  Pole  or  the  transit  of  Venus ;  but  they 
are  searching  for  common,  every-day,  practi- 
cal and  attainable  standards  of  which  as- 
toundingly  few  have  been  determined. 

Time  is  infinite,  but  that  does  not  concern 
us  so  much  as  that  five  minutes  of  suspension 
of  breathing  or  heart  beating  carries  us  over 
the  boundary  that  separates  life  from  death. 

Congress  has  determined  that  a  dollar  (not 
now  coined)  shall  consist  of  25.8  grains  of 
gold  nine-tenths  fine,  but  it  may  be  a  shock 


108         EFFICIENCY  AS  A  BASIS  FOR  OPERATION' 

to  learn  that  Congress  has  never  determined 
the  grain  or  any  other  standard  of  weight 
or  of  length  or  of  time.  The  United  States 
Treasury  Department  has  adopted  a  gallon 
and  a  bushel,  but  neither  is  in  accordance 
with  the  legal  standards  of  Great  Britain. 
They  not  only  differ  from  the  present  stand- 
ards of  Great  Britain,  being  respectively  17 
per  cent  and  3  per  cent  smaller,  but  they  also 
always  differed  from  the  discarded  English 
standards  from  which  they  were  derived. 

On  April  15,  1903,  the  Superintendent  of 
Weights  and  Measures,  not  Congress,  direc- 
ted that  the  international  metre  and  kilo- 
gramme should  be  in  the  future  regarded  as 
fundamental  for  metric  and  customary 
weights  and  measures.  Congress,  which  has 
failed  to  legalize  standards  either  of  weight 
or  of  length  or  of  capacity,  has  however 
standardized  the  spelling  of  Porto  Rico  and 
the  motto  "In  God  We  Trust"  on  the  dollar, 
and  it  is  safe  to  say  that  Congress  has  con- 
cerned itself  more  with  this  motto  than  with 
the  fact  that  all  the  thousands  of  millions  of 
dollars  of  railroad  and  industrial  shares  sank 
in  October,  1907,  33  per  cent  in  value  in  a  few 
weeks,  and  that  the  earning  power  of  hun- 
dreds of  thousands  of  men,  eager  to  work, 


STANDARDS  109 

fell  from  an  average  of  $2.00  per  day  to  noth- 
ing. 

In  Germany  in  the  polytechnic  schools  as 
late  as  1875  and  perhaps  now, mediaeval  stand- 
ards of  proper  procedure  in  all  matters  ap- 
pertaining to  students '  duels  were  more  defi- 
nite, punctilious,  important,  than  surpris- 
ingly lacking  modern  standards  of  scientific 
accuracy. 

These  examples  of  American  legislative 
and  German  scholastic  insistence  in  the  puerile 
and  neglect  of  the  all-important  almost  give 
the  dignity  of  natural  law  to  the  statement 
that  in  standards  insistence  and  excitement 
are  in  inverse  proportion  to  practical  every- 
day importance,  and  with  such  high  examples 
as  Congress  and  German  Universities  it  is 
not  surprising  that  in  the  line  organization 
of  American  industrial  enterprises  there  is 
more  sensitiveness  about  prerogative  than  in 
Congress  itself,  more  alertness  to  take  of- 
fence at  the  unimportant  than  in  the  German 
student. 

The  difficulties  blocking  the  path  of  the  /x 
radical  improvement  that  would  immediately 
result  from  supplementing  the  line  with  staff 
and  standards,  are  the  sensitiveness  and  ap- 
prehension of  the  line  that,  in  some  way  it 


110         EFFICIENCY  AS  A  BASIS  FOR  OPERATION 

cannot  explain,  staff  activity  and  application 
of  standards  will  reflect  on  line  ability,  as  if 
in  the  round-the-word  automobile  race,  the 
benefits  of  good  roads  from  Berlin  to  Paris, 
and  the  speed  made  over  the  good  roads,  re- 
flected on  the  capacity  of  the  automobile 
drivers  who  made  slow  yet  astonishing  prog- 
ress through  Siberia. 


Chapter  VI 

THE  EEALIZATION  OF  STANDARDS  IN 
PRACTICE 

^TT^HE  five  preceding  chapters  are  general 
-*■  in  character,  showing  that  inefficiency 
is  ahnost  universal,  that  each  nation  has  to 
some  extent  offset  general  inefficiency  by 
good  qualities  of  its  own,  differing  from  the 
good  qualities  of  other  nations,  that  Ameri- 
can advantages  in  the  past  lay  in  great 
natural  resources  and  in  wonderful  oppor- 
tunities, pursued  by  keenly  adaptable  rather 
than  specially  skilled  men. 

Inefficiencies  everywhere  were  ascribed  to 
the  primitive  and  elementary  character  of  the 
directing  organization,  which  has  progressed 
very  little  beyond  the  military  line  evolved 
centuries  ago,  continuing  unchanged  even  in 
armies  until  the  latter  half  of  the  nineteenth 
century.  To  lessen  inefficiency,  not  less  of 
military  line,  but  more  of  supplementary 
staff  was  urged,  and  a  specialized  staff  was 
111 


112         EFFICIENCY  AS  A  BASIS  FOR  OPERATION 

indicated  as  the  logical  and  inevitable  for- 
ward step.  It  is  the  business  of  tbe  staff,  not 
to  accomplish  work,  but  to  set  up  standards 
and  ideals,  so  that  the  line  may  work  more 
efficiently. 

In  attempting  to  better  and  strengthen 
great  American  repair  and  manufacturing 
plants,  it  was  found  necessary  to  use  the 
perseverance  of  the  British,  the  innovating 
logic  of  the  French,  the  thorougimess  of  the 
Germans,  the  open-mindedness  of  the  Japa- 
nese, and  the  adaptability  of  the  American, 
and  also  to  use  staff  first  to  determine  and 
then  to  facilitate  their  attainments.  The  out- 
lines of  a  successful  attempt  to  apply  staff 
and  standards  to  a  particular  shop  will  now 
be  described./ 

To  enter  a  shop  employing  2,000  men, 
each  one  doing  an  average  of  four  different 
jobs  each  day,  aggregating  for  all  the  men 
8,000  separate  tasks,  these  tasks  changing 
from  day  to  day,  so  that  there  is  a  total  of 
tens  of  thousands  of  different  tasks  in  a  year 
— to  be  expected  to  standardize  each  and 
every  one  of  the  tasks  as  to  both  time  and 
cost,  is  dismaying;  not  more  dismaying  per- 
haps than  the  proposition  would  have  been 
to  the  primitive  woman,  whose  hair  was  a 


THE  REALIZATION   OF  STANDARDS  113 

mass  of  matted  tangles,  that  each  and  every 
one  of  the  separate  hairs  of  her  head  ought 
to  be  brushed  and  combed  into  its  perfect 
place  at  least  twice  every  day.  It  does  not 
require  much  experience  to  distinguish  be- 
tween the  well-arranged  head  of  hair  and 
the  matted  one,  nor  does  it  require  much 
experience  to  recognize  in  a  machine  shop 
the  difference  between  what  is  and  what 
ought  to  be. 

In  the  particular  shop  under  investigation 
there  were  great  natural  opportunities,  as 
abundance  and  steady  supply  of  work,  no 
financial  worry  as  to  income,  the  shop  itself 
manned  by  an  unusually  fine,  progressive, 
and  experienced  body  of  officials  and  em- 
ployees. If  under  these  conditions  there  was 
great  inefficiency,  great  discrepancy  between 
actual  results  and  reasonable  standards,  the 
presumption  is  that  the  inefficiency  was  not 
due  to  conditions  but  to  form  of  organiza- 
tion and  to  methods  of  administration. 

The  organization  was  the  usual  line  or- 
ganization; a  president,  a  vice-president  in 
charge  of  operation,  a  general  superintend- 
ent in  charge  of  all  shops,  a  superintendent 
in  charge  of  each  large  shop,  a  general  fore- 
man, foremen  over  each  department,  gang 


114         EFFICIENCY  AS  A  BASIS  FOR  OPERATION 

bosses  directly  over  each  subdivision  of  each 
department.  Each  of  the  higher  officials  had 
his  own  individual  staff,  these  individual 
staffs  being  weaker  and  cheaper  towards  the 
bottom,  as  when  a  foreman  appropriated  a 
machinist's  helper  to  act  as  general  utility 
assistant  in  the  foreman's  office.  In  two 
directions  only  were  there  embryonic  staffs 
in  parallel  with  the  line,  extending  from  the 
top  to  the  bottom.  One  of  these  staffs  was 
the  detective  service,  whose  operators,  cir- 
culating among  the  employees  in  the  guise 
of  machinists,  boiler  makers,  helpers,  etc., 
reported  through  their  own  chief  whatever 
they  thought  would  be  of  interest  to  the  head 
of  the  line.  While  the  staff  idea  was  here, 
while  it  was  felt  that  the  line  by  itself  was 
inefficient,  the  two  essentials  of  modern  staff 
were  wanting,  since  the  secret  operators  were 
not  only  without  standards  but  they  were  not 
helpful  to  the  line  members  whose  doings 
they  were  adversely  reporting.*  The  other 
staff,  the  accounting  department,  was  of  very 
high  character,  had  high  ideals  and  exact 
standards,  was  in  helpful  touch  from  top  to 


*  A  staff-supplemented  shop  would  need  very  little  detective 
reporting,  since  standards  and  their  attainment  would  result 
in  eliminating  nearly  everything  of  importance  that  detectives 
now   report  on. 


THE  REALIZATION  OF   STANDARDS  115 

bottom  with  all  members  of  the  line.  The 
head  of  the  accounting  staff  was  the  general 
auditor,  on  the  president's  staff;  under  him 
were  the  division  auditors,  mechanical  ac- 
countants, shop  accountants,  down  to  the  time 
keepers  and  pay-roll  distributors. 

The  accounting  staff,  fully  organized  and 
capable,  proved  of  the  greatest  assistance  as 
a  type  on  which  to  model  other  staffs. 

Before  beginning  standardizing  work  a 
number  of  surveys  were  run  through  the  shop 
to  ascertain  what  was  not  covered  by  the  ex- 
isting line  and  accounting  organizations.  The 
first  survey  was  to  ascertain  whether  mate- 
rials were  being  properly  handled  and 
checked;  the  second  survey  covered  the  con- 
dition of  the  machines  and  tools ;  in  the  third 
survey  a  number  of  labor  essays  or  audits 
determined  the  relation  between  what  men 
were  actually  doing  and  what  they  should  do ; 
the  fourth  survey  showed  as  to  a  few  opera- 
tions the  relation  between  current  costs  and 
standard  costs,  and  the  fifth  survey  the 
speed  of  movement  of  work  through  the  shop. 
It  does  not  follow  because  a  shop  is  lax  in 
one  of  these  directions,  that  it  is  equally  lax 
in  others ;  it  does  not  follow  that  being  excel- 
lent in  one  direction  it  will  be  excellent  in  the 


116         EFFICIENCY  AS  A  BASIS  FOR  OPERATION 

others.  Good  work  had  always  been  an  ideal 
in  this  shop,  also  a  large  output ;  but  neither 
costs  nor  speed  had  been  ideals. 

The  preliminary  investigations  revealed 
certain  organic  weaknesses  of  operation,  due 
to  the  absence  of  ideals  or  standards  and  to 
the  absence  of  a  staff  organization  able  to 
create  and  realize  standards.  To  eliminate 
these  weaknesses  a  staff  was  gradually  crea- 
ted supplementary  to  the  line.  This  staff 
organization  would  not  have  had  necessary 
powers  unless  it  had  started  very  high  up,  the 
chief  of  staff  in  charge  of  standardizing  and 
efficiency  methods  being  on  the  staff  of  the 
vice-president,  without  whose  support  in 
many  an  hour  of  need  nothing  could  have 
been  accomplished. 

Under  the  chief  of  staff  were  various  spe- 
cialists, selected  or  promoted  for  their  dem- 
onstrated experience,  each  one  of  these  spe- 
cialists becoming  the  head  of  a  special  staff 
line.  The  staff,  in  fact,  was  evolved  not  theo- 
retically but  in  direct  response  to  necessity. 

The  five  different  lines  of  preliminary  sur- 
vey were  each  made  permanent  fields  of  in- 
vestigation and  control. 

A  staff  specialist  was  put  in  charge  of 
everything  appertaining  to  materials,  his  du- 


THE   REALIZATIOX   OF   STANDARDS  117 

ties  being  to  evolve  methods  which  would 
always  supply  the  right  material  at  the  right 
jilace,  at  the  right  time,  in  the  required  qual- 
ity, mininuAm  necessary  (|nantit3%  and  at  low- 
est cost.  Another  specialist  was  put  in 
charge  of  all  matters  appertaining  to  the 
maintenance  and  operation  of  machines  and 
tools.  A  third  and  most  important  organiza- 
tion of  specialists  was  given  the  duty  of 
standardizing  every  task  as  to  time;  a  fourth 
specialist  took  up  the  matters  of  standard 
costs,  and  a  fifth  specialist  provided  methods 
by  which  all  work  could  be  dispatched 
through  the  shop  even  more  carefully  and 
accurately  than  trains  are  dispatched  on  a 
railroad. 

Although  in  this  particular  shop — a  repair 
shop  for  a  large  corporation — costs  had 
never  been  considered  of  commercial  impor- 
tance, it  was  found  absolutely  necessary  to 
provide  a  standard  method  of  determining 
costs,  applicable  equally  to  the  five-minute 
task  of  a  single  worker  or  to  a  month's  out- 
put of  the  whole  shop. 

Costs  can  be  subdivided  into  three  divi- 
sions: (1)  material  costs,  (2)  direct-labor 
costs,  and  (3)  indirect  or  overhead  or  sur- 
charge  costs,  this    last   division   embracing 


118         EFFICIENCY  AS  A  BASIS  FOR  OPERATION 

everything  that  is  not  material  or  direct  la- 
bor. Indirect  charges  (3)  were  subdivided 
into  four  class:  (1)  power,  (2)  maintenance, 
(3)  rent,  (4)  administration.  As  a  general 
production  proposition,  there  is  no  differ- 
ence between  a  man  and  a  machine,  the  mere 
fact  that  the  man  is  paid  wages  and  the  ma- 
chine is  virtually  a  slave  (in  which  capital  is 
invested,  which  has  to  be  maintained  and 
which  in  time  perishes)  being  a  financial  and 
not  a  productive  difference.  Therefore  all 
the  expenses  of  power,  maintenance,  rent, 
and  administration  were  subdivided  partly  to 
men  and  partly  to  machines,  thus  giving  the 
foundation  for  a  standard  cost  of  any  opera- 
tion for  any  unit  of  time.  Each  of  the  four 
subdivisions  of  overhead  or  burden  was  put 
under  the  care  of  a  staff  specialist. 

When  a  simple  system  of  stating  all  costs 
— whether  for  a  single  task  for  man  or  ma- 
chine, or  for  all  a  man's  work  for  any  period, 
or  for  all  the  work  of  a  gang  or  department, 
or  for  a  whole  plant — is  available ;  when  this 
system  permits  parallel  statement  of  actual 
and  standard  costs — then  the  whole  problem 
is  well-nigh  solved,  patience,  persistence, 
fidelity,  and  high  ideals  accomplishing  the  re- 
sults, through  the  use  of  staff  specialists. 


THE  REALTZATTOX   OF   STANDARDS  119 

The  system  under  which  costs  were  stand- 
ardized will  be  elucidated  in  another  chap- 
ter, it  being  first  more  important  to  see  the 
results  of  this  system,  when  applied  to  a 
single  department  of  a  great  works,  than  to 
understand  the  system  in  its  details. 

Department  F. 

Statement  of   Condition  for   12   Months  Preceding 
June  30  on  Basis  of  Standard  Volume  of  Output. 

Costs  per  Hour. 

Attainable 
Eeduc- 
Actual.    Standard.    Waste,  tion. 

Direct  wages $36.93     $27.77     $9.16     25    % 

Overhead  expense.      18.98       11.11         7.87     41.5% 
Machine  expenses.     48.9-4       29.17       19.77     40    % 


$104.85     $68.05     $36.80     35.1% 

If  this  shop  averaged  2,700  hours  in  the 
year  the  total  expense  would  be  $283,095,  the 
preventable  waste  $99,360. 

This  statement  shows  that  whereas  the  ac- 
tual cost  per  hour  for  a  given  output  aver- 
aged over  a  period  of  12  months  had  been 
$104.85,  it  was  determined  by  the  staff  offi- 


120         EFFICIENCY  AS  A  BASIS  FOR  OPERATIOX 

cials  that  it  should  cost  only  $68.05,  a  reduc- 
tion of  35.1  per  cent. 

This  statement  is  remarkable.  The  actual 
expenses  were  those  of  the  preceding  twelve 
months.  The  standard  expenses  are  theo- 
retically predetermined  by  standardizing  )i()t 
the  cost  of  work,  but  the  efficiency  of  men,  of 
machines  and  of  methods. 

The  standard  costs  were  those  possible  at 
the  date  the  work  was  undertaken.  By  the 
time  actual  costs  are  reduced  to  $68.05  per 
hour  new  standards  will  have  come  into  ex- 
istence, making  the  standard  costs  as  low, 
perhaps,  as  $60  per  hour,  so  that  the  stand- 
ard is  always  elusively  ahead  of  the  actual 
cost. 

The  president  of  the  company  does  not 
need  to  see  each  month  much  more  than  this 
one  statement  (prepared  however  in  the  form 
of  a  flowing  record)  so  that,  at  a  glance,  he 
can  see  the  trend  of  progress.  In  this  par- 
ticular case  a  time  limit  was  set  within 
which  the  reduction  was  to  be  accomplished. 

That  the  reduction  from  $104.85  per  hour 
cannot  be  effected  in  a  single  month  is  ob- 
vious, and  equally  so  that  it  ought  not  to 
take  ten  years.  Whether  it  is  to  take  a  year 
or  two  years  or  four  years  depends  solely 


THE   REALIZATION   OE   STANDARDS 


121 


on  the  willingness  of  the  management.  The 
shaded  area  in  the  diagram  measures  the 
exact  cost  of  taking  two  years  instead  of  one, 
and  its  amounts  to  about  $100,000. 


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12  Months                                                    12  Months 

The  Engineering  Magazine 

DIAGRAM     SHOWING    COST    OF    DELAY    IN    REDUCING    COSTS    TO 
STANDARD. 

This  epitomized  statement  of  standard 
hourly  cost  is  for  a  definite  number  of  stand- 
ard cost  units,  so  that  whatever  fluctuations 
in  kind  or  volume  of  work  occur  from  month 
to  month,  standard  comparisons  hold  good. 
The  assumptions  on  which  standard  costs  are 
based  for  a  Department,  F,  were  as  fol- 
lows : — 


Standard  annual  hours  per  machine 3,400 

Standard  annual  hours  of  shop  work ....  2,700 

Standard  value  of  equipment $200,000 

Standardized  overhead  charges $100,000 


132      efficiency  as  a  basis  for  operation 

Subdivision  of  Indirect  Charges, 

Reduc- 

Actual.     Standard,  tion. 

Power $26,100     $13,000  50    % 

Maintenance    96,618       48,000  50    % 

Kent 14,587       12,000  17    % 

Administration : 

Direct 9,870       12,000  21.5% 

Indirect   21,550       15,000  30    % 

Total    $168,725  $100,000     40.8% 

In  pursuing  the  location  of  responsibility 
the  indirect  charges  were  apportioned  partly 
to  machines  and  partly  to  men. 

Reduc- 
Aetnal.     Standard,     tion. 
Overhead  charges : 

Assessed  to  machines $117,470     $70,000     40.4% 

Assessed  to  men 51,255       30,000     41.2% 

Total    $168,725  $100,000     40.8% 

Direct  pay  roll 99,794       75,000     25    % 

Total    $268,519  $175,000     35.1% 

Standard  practice  propositions  are  gener- 
ally wrecked  on  the  fact  that  to  secure  a  net 
reduction  of  40  per  cent  as  to  the  whole,  the 
cost  of  direct  supervision  is  increased. 

Managers  are  reluctant  to  incur  an  in- 
creased cost  for  direct  supervision  (in  this 
case  of  2.1  per  cent  or  $2,130)  to  effect  the 


THE   REALIZATION   OF   STANDARDS  123 


40  per  cent  net  reduction  amounting  to  $ 
725,  because  they  find  it  impossible  to  believe 
that  so  great  a  gain  is  attainable,  especially 
as  it  is  not  made  the  first  month.  They  are 
certain  tliat  the  very  extensive  stafT  organi- 
zation must  necessarily  cause  an  unbearable 
increase  in  indirect  expenses.  This  is  not 
the  case  for  three  reasons : 

1, — A  portion  of  the  expense,  the  prelimi- 
nary studies  and  investigations,  are  properly 
charged  to  capital  investment  as  they  have 
lasting  value — as  much  as  drawings  or  pat- 
terns, more  than  machines. 

2. — When  the  output  of  a  plant  aggregates 
$15,000,000  a  year,  with  a  pay  roll  of  $3,000,- 
000,  the  pro  rata  expenses  of  the  general  staif 
officials  prorated  to  a  department  shop  whose 
direct  and  indirect  roll  is  only  $150,000  a 
year  are  only  5  per  cent  of  the  total,  so 
that  if  the  general  staff  cost  $40,000,  the  as- 
sessment to  Department  F  would  be  only 
$2,000. 

3. — All  the  particular  staff  expenses  are 
charged  directly  to  the  account  benefited.  If 
a  staff  advisor  for,  or  a  designer  of,  tools  is 
employed  his  expenses  are  charged  directly 
to  the  maintenance  account. 

The  employment  of  so  complete  a  staff  will 


124         EFFICIENCY  AS   A  BASIS  FOR  OPERATIOX 

necessarily  liiglily  specialize  operations,  and 
economies  result,  not  from  an  effort  to  se- 
cure them,  but  from  an  effort  to  do  every- 
tliiiii^'  in  a  standard  practical  ninnnor.  Stand- 
nrd  power  conditions  mean  the  same  power 
with  less  coal  and  less  power  for  the  same 
output.  As  power  happens  to  be  one  of  the 
subdivisions  of  burden,  the  burden  per  unit 
is  reduced  without  any  thought  or  worry 
as  to  whether  it  is  related  to  direct-labor 
increases  or  decreases. 

Standard  maintenance  conditions  mean  far 
better  tools  for  less  cost,  greater  output  from 
the  same  machines;  and  as  maintenance  is 
one  of  the  surcharge  accounts,  when  it  de- 
creases the  maintenance  surcharge  per  unit 
decreases.  In  Department  F,  actual  expenses 
for  power  were  $26,100;  predetermined 
standard  power  expenses  were  placed  at 
$13,000.  This  astonishing  reduction  was 
realized  in  practice  and  was  effected  in  the 
following  manner:  A  power  specialist  is 
made  responsible  for  the  production  of 
power.  If  the  actual  expense  is  $60  a  year 
per  horse  power  of  3,000  hours,  every  item  of 
expense  is  analyzed,  and  it  is  ascertained 
that  under  standardized  conditions  the  ex- 
pense should  not  exceed  $45,  so  this  standard 


THE  EEALIZATIOX   OF  STANDARDS  125 

cost  is  set  up  for  the  man  in  charge  of  power 
production  to  aim  at.  On  the  other  hand,  the 
foreman  of  the  department  uses  power,  it 
being  entirely  beyond  his  control  whether  the 
rate  to  him  is  $60  a  year  or  $45 ;  but  wasteful 
use  of  power  is  not  beyond  his  control,  so 
another  staff  expert  scrutinizes  every  item  of 
power  use,  ascertains  that  by  the  elimination 
of  destructive  frictions,  leaks,  and  wastes  of 
various  kinds,  the  total  annual  consumption 
of  power  can  be  reduced  from  435  to  300 
horse  power ;  435  horse  power  at  $60  amounts 
to  $26,100,  but  300  horse  power  at  $43.33 
amounts  only  to  $13,000.  No  one  acquainted 
with  the  scandalous  inefficiencies  of  the  aver- 
age factory  power  plant,  consuming  from  5 
to  7  pounds  of  coal  i3er  horse  power  per 
hour,  will  question  the  ability  to  lower  costs 
28  per  cent,  and  no  one  acquainted  with  the 
leaks  of  air  and  steam  and  water,  leaks  of 
light  and  heat,  all  the  frictional  losses  due  to 
lack  of  alinement,  too  tight  bolts,  etc.,  will 
question  the  possibility  of  reducing  power 
consumption  30  to  33  per  cent. 

The  standards  of  43.33  per  horse  power  per 
year,  and  of  300  horse  power  for  the  depart- 
ment, are  by  no  means  final.  As  long  as  it 
pays  to  follow  them,  further  reductions  are 


126         EFFICIENCY  AS  A  BASIS  FOR  OPERATION 

in  order  until  standard  minimum  practice  is 
attained.  The  essential  of  the  system  is  that 
the  item  of  power,  as  to  production,  distri- 
bution, and  use,  is  set  up  monthly  in  two 
parallel  columns,  one  showing  actual,  the 
other  standard  results,  and  the  chief  of  staff 
in  conjunction  with  chief  of  line  combine 
their  efforts  until  facts  and  theory  coalesce 
— until  the  victory  is  won,  a  victory  not  less 
inspiring  because  it  is  bloodless. 

The  item  of  maintenance  is  treated  in  ex- 
actly the  same  way.  There  must  be  a  gen- 
eral supervisor  of  maintenance  who  stand- 
ardizes the  quality,  custody,  and  issue  of  small 
tools,  who  remodels  the  larger  machines,  who 
anticipates  breakdowns  or  repairs  them  so 
that  the  same  collapse  will  never  occur  again. 
There  is  in  addition  all  the  economy  that  re- 
sults from  the  careful  and  checked  use  of 
machines  and  tools.  On  even  a  larger  scale 
than  the  one  now  being  discussed,  my  own 
staff  assistant,  in  charge  of  maintenance  of 
shop  machinery  and  tools  effected  the  follow- 
ing results: 
Year.  Output.  Expense.  Unit  Cost. 

1905 47,854     $486,620     $10.16 

1906 57,760       376,106         6.51 

1907 64.628       315,844         4.89 

1908 64,326       290,832         4.52 


THE   REALIZATION   OF   STANDARDS  127 

The  reduction  in  unit  cost  is  more  than  50 
per  cent,  the  economy  on  a  unit  basis  is 
$362,798. 

In  connection  with  this  account  the  experi- 
ence was  amusing.  The  general  superintend- 
ent was  so  alarmed  at  the  direct  staff  ex- 
penses and  the  expenses  of  the  improve- 
ments recommended  by  the  staff,  that  he  or- 
dered a  special  account  to  be  opened,  in  which 
they  were  all  entered,  so  that  at  the  end  of 
the  year  he  might  point  to  this  account  as 
the  cause  of  the,  to  him,  inevitable  and  ab- 
horrent increase.  After  absorbing  all  these 
special  expenses,  the  actual  net  saving  in 
money  at  the  end  of  the  year  was  $110,514, 
for  a  20  per  cent  greater  output. 

It  is  unnecessary  to  discuss  ''rent"  in  de- 
tail. Standard  expenses  show  slight  reduc- 
tions below  actual  owing  to  standardization 
of  repairs,  better  custody  of  buildings,  etc. 
There  are  occasions  when  rent  can  be  very 
greatly  reduced,  by  increased  use  of  old  in- 
stead of  building  new  buildings,  or  the  dou- 
ble-shifting of  a  shop.  Using  the  building 
20  hours  a  day  instead  of  10  hours  will  very 
greatly  reduce  rent  per  unit  of  output.  The 
actual  result  of  standardizing  the  legitimate 
cost  of  all  these  different  items  of  burden  is 


128         EFFICIENCY  AS  A  BASIS  FOR  OPERATION 

to  reduce  general  expenses  per  unit  or  per 
hour  about  40  per  cent. 

The  method  has  been  more  fruitful  than 
the  usual  methods  of  effecting  economies  in 
shop  operation  because  an  ideal  standard 
cost  is  ascertained  at  which  to  aim,  and  reali- 
zation is  facilitated  not  by  subdividing  ex- 
penses to  departments,  thus  frittering  away 
responsibility,  but  by  grouping  all  expenses 
under  a  few  heads  and  putting  each  group  in 
charge  of  a  specialist,  whose  ideal  is  not  to 
reduce  cost  of  specific  output  but  to  stand- 
ardize operations. 

The  problem  of  .standardizing  direct  pay 
roll  is  much  more  difficult,  as  it  involves  the 
determination  of  a  standard  time  and  costs 
for  every  task.  For  every  work  order  issued 
to  employees  there  is  a  determinable  stand- 
ard time.  This  time  must  be  ascertained  by 
the  Taylor  system  of  time  studies.  The  spe- 
cialist at  the  head  of  time-study  work  must 
be  able  at  a  moment's  notice  to  state,  before 
the  work  is  begun,  what  the  standard  time  is. 
The  determination  of  standard  time  is  a  pro- 
fession in  itself  at  which  specialists  become 
very  expert,  so  that  on  the  average  their  de- 
terminations will  not  vary  more  than  1  or  2 
per  cent  from  ideal   standards.     Standard 


THE   REALIZATION   OF   STANDARDS  1'20 

times  may  be  anywhere  from  10  per  cent  to 
90  per  cent  less  than  actual  times. 

Standard  time  is  a  reasonable  time  for  a 
good  worker  to  accomplish  the  task  set.  The 
worker  is  limited  hj  conditions  as  they  are ; 
but  as  conditions  change,  standard  times  will 
be  revised  in  such  a  way  as  not  to  interfere 
with  the  personal  efficiency  of  the  worker. 

It  must  be  made  pleasanter  and  more 
agreeable  for  the  worker  to  attain  stand- 
ard output  or  to  surpass  it  than  to  fall  below 
it.  His  cooperation  is  secured  by  appealing 
to  some  of  the  strongest  human  instincts — 
some  urging  him  forward,  as  ambition  and 
hope,  an  increased  wage  rate  set  by  himself, 
pleasure  in  the  work;  others  impelling  him 
from  behind,  as  apprehension  of  discharge. 

The  result  of  standard  efficiency  in  work- 
ers, coupled  with  standard  other  conditions, 
was  to  reduce  direct-labor  costs  25  per  cent, 
an  unusually  small  reduction. 

I  do  not  lay  much  stress  on  names  or  forms. 
I  have  been  in  shops  of  very  high  efficiency 
whose  managers  would  not  have  understood 
the  meaning  of  the  word  staf.  Yet  staff  tal- 
ent and  staff  activity  were  in  full  swing,  the 
manager  by  natural  intuition  having  selected 
foremen  who  had  the  double  gift  of  line  and 


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Pieces  Per  Pay                 jjie  Engineer 

ing  Magazine 

DIAGRAM    OF    EFFECT    OF    EFFICIENCY    METHODS. 

i;30 


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p.c. 

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THE  REALIZATION'  OF  STANDARDS  131 

staff  ability.  I  also  recognize  that  Mr.  F.  W. 
Taylor's  shop  organization  based  on  func- 
tional foremanship  is  but  another  way  of  se- 
curing staff  results,  through  staff  specialists. 

Cost  and  Profit  per  Piece  and  per  Day  of 
Various  Efficiencies. 

33         50      66.7       100       133 

p.c. 
Pieces  per  day ...  1 

Total  costs  per  day. $150 
'Net  cost  per  piece.    150 

SeUing  price 100 

Loss  per  piece   ....     48 

Profit  per  piece...  18         38         47 

Loss  per  day 48         15 

Profit  per  day 36       114       188 

Whatever  the  names  given  to  the  line  fore- 
man or  the  staff  specialist,  it  has  been  dem- 
onstrated over  and  over  again,  and  on  the 
largest  scale,  that  statf  investigation  will 
show  standard  costs  to  be  far  below  actual 
costs,  and  that  j^redetermined  standard  costs 
can  be  attained  through  the  direct  and  indi- 
rect assistance  given  to  the  line  by  the  staff. 
The  possible  volume  of  the  economy  depends 
solely  on  the  magnitude  of  the  business ;  the 
i-apidity  with  which  economy  can  be  effected, 
solely  on  the  courage  and  thoroughness  witli 


132         EFFICIENCY  AS  A  BASIS  FOR  OPERATION 

which  the  work  is  prosecuted.  The  labor  dif- 
ficulties are  virtually  nil,  if  there  is  persis- 
tent and  conscientious  effort  to  give  the 
worker  a  square  deal.  The  greatest  impedi- 
ment is  the  reluctance  of  the  line  to  accept 
staff  assistance,  metliods,  and  standards,  in- 
cluding ecjuity  towards  employees./' 

The  diagram  on  page  130  illustrates  graph- 
ically and  theoretically  the  effect  on  costs  and 
profits  of  an  increased  output  due  to  staff 
stimulus  and  bonus  to  the  line. 


Chapter  VII 

THE  MODERN  THEORY  OF  COST 
ACCOUNTING 

'"F^HERE  are  two  radically  different  meth- 
■■-  ods  of  ascertaining  costs:  the  first 
method,  to  ascertain  them  after  the  work  is 
completed;  the  second  method,  to  ascertain 
them  before  the  work  is  undertaken.  The 
first  method  is  the  old  one,  still  used  in  most 
manufacturing  and  maintenance  undertak- 
ings ;  the  second  method  is  the  new  one,  be- 
ginning to  be  used  in  some  very  large  plants, 
where  its  feasibility  and  practical  value  have 
already  been  demonstrated. 

The  objections  to  the  old  method  are  not 
only  that  it  delays  information  until  little 
value  is  left  in  it,  but  that  it  is  wholly  and 
absolutely  incorrect,  mixing  up  with  costs  in- 
cidents that  do  not  have  the  remotest  direct 
connection  with  them,  so  that  analysis  of  cost 
statements,  as,  for  instance,  repair  costs  per 
locomotive  mile,  does  not  lead  to  elimination 
133 


13-J:         EFPICIENCY  AS  A  BASIS  FOR  OPERATION 

of  wastes.  The  advantages  of  the  second 
method  are  not  only  that  costs  must  be  ascer- 
tained before  the  work  is  begun,  but  that  the 
costs  as  finally  tabulated  are  the  real  costs 
divided  as  to  each  unit,  whether  a  single  ele- 
ment or  aggregated  out  of  a  million  separate 
elements  (1)  into  standard  expense  and  (2) 
into  avoidable  loss.  An  analysis  of  costs  so 
stated  facilitates  an  almost  inexorable  elimi- 
nation of  inefficient  conditions  of  all  kinds, 
standard  expenses  being  constantly  stand- 
ardized at  new  levels — ^wastes,  the  excess 
above  standard  cost,  being  constantly  re- 
moved. 

The  general  method  of  anticipation  as  op- 
|)0sed  to  the  method  of  retrospect  is  not  a 
new  one,  and  has  already  largely  made  its 
way  in  other  lines  of  human  activity.  The 
old  method  was  to  call  out  the  priests  and 
tom-toms  when  an  eclipse  was  occurring  and 
thus  drive  away  the  devil  who  was  eating 
the  sun.  The  modern  method  is  to  predict 
the  eclipses  decades  or  centuries  in  advance, 
and  check  up  our  clocks,  watches,  and  calen- 
dars by  the  actual  occurrence.  Under  the 
old  method  the  farmer  planted  what  seed  he 
had,  fertilized  it  with  any  available  manure, 
and  trusted  to  nature  to  do  the  rest.     The 


COST   ACCOUNTING  135 

modern  farmer  predetermines  conditions,  se- 
lects and  tests  in  advance  special  seed,  feeds 
the  soil  with  choinicalh"  adjusted  fertilizer, 
irrigates  scientifically,  and  trusts  as  little  as 
possible  to  nature.  In  California  he  forces 
the  lemon  tree  to  bear  for  the  Fourth  of  July 
and  the  orange  trees  to  bear  for  Christmas. 
In  hygiene,  the  old  method  is  to  wait  until 
the  whole  community  is  infected  with  yellow 
fever  or  bubonic  plague  and  then  to  quaran- 
tine and  use  chloride  of  lime;  the  newer 
method  is  to  prevent  the  mosquitoes  poten- 
tially capable  of  carrying  the  germs  of  yellow 
fever  from  ever  being  born,  and  to  kill  off 
the  rats  and  ground  squirrels  that  carry  the 
fleas  whose  saliva  infects  the  human  body 
with  bubos.  In  travel,  the  old  method  was  to 
start  an  ox  team  from  St.  Joseph  for  Cali- 
fornia and  to  arrive  somewhere  between  six 
months  and  a  year  after  the  start.  The  new 
method  is  to  leave  San  Francisco  on  the  min- 
ute, and  to  arrive  in  New  York  on  the  Cen- 
tury Limited  also  on  the  minute.  That  pre- 
cision and  exactness  are  more  largely  due  to 
organization  than  to  conditions  is  proved  by 
the  fact  that  the  pony  express  of  fifty  years 
ago  which  made  its  runs  between  Sacramento 
and  St.  Joseph,  a  distance  of  nearly  2,000 


13G         EFFICIEN-CY  AS  A  BASIS  FOR  OPERATIOX 

miles,  under  unparalleledly  adverse  condi- 
tions of  Indian  hostility  and  climatic  acci- 
dent, adhered  more  closely  to  time  schedule 
than  many  a  modern  railroad.  In  ocean 
travel  the  old  method  was  to  sail  at  some  in- 
definite date  from  Europe  and  to  arrive  at  a 
more  indefinite  date  in  America,  much  as  Co- 
lumbus did  on  his  first  voyage,  an  uncertainty 
of  a  couple  of  months  not  mattering;  but  the 
modern  method  is  to  build  vessels  whose 
exact  speed  is  predetermined  before  the  keel 
is  laid,  as  for  the  Lusitania  and  Mauretania, 
which  leave  port  on  the  minute  and  arrive 
almost  on  the  hour. 

Predetermination  of  results  is  the  main 
characteristic  of  the  modern  method.  The 
acceptance  of  the  haphazard  is  the  main 
characteristic  of  the  old  methody  still  in  full 
and  orthodox  standing  in  cost  accounting. 
/..  Predetermination  of  results  is  based  on  scien- 
tific certainties  modified  by  experience/  It 
ought  not  to  be  necessary  to  prove  that  retro- 
spect costs  based  on  servile  record  of  the 
haphazard  cannot  be  of  value,  but  actual 
illustrations  from  actual  practice  of  their  un- 
reliability may  hasten  the  conversion  of  those 
who  are  still  skeptical. 

Two  closely  similar  types  of  locomotives 


COST  ACCOUNTING  137 

were  operating  on  a  great  railroad,  one  type 
in  the  east,  the  other  in  the  west,  both  doing 
virtually  the  same  work.  The  vice-president 
of  the  road  desired  to  order  a  large  number 
of  new  locomotives  of  the  general  type  in 
question.  He  called  for  the  records  of  the 
two  classes  and  found  that  the  locomotives 
operating  in  the  west  cost  $0.14  per  mile  for 
maintenance,  but  that  the  locomotives  in  the 
east  cost  $0.10  per  mile  for  maintenance. 
With  these  records  before  him  he  felt  in- 
clined to  order  the  type  costing  for  repairs 
$0.10  per  mile.  The  facts  were,  however, 
that  the  western  round-houses  and  repair 
shops  were  operating  at  50  per  cent  efficiency 
and  the  eastern  shops  and  round-houses  at 
80  per  cent  efficiency,  so  that  the  real  respec- 
tive costs  of  the  locomotives  were  for  the 
western  $0.07  per  mile  and  for  the  eastern 
$0.08  per  mile.  In  this  case  so-called  actual 
costs  would  have  been  expensively  mislead- 
ing. 

A  large  manufacturing  plant  turned  out 
40  special  machines  at  a  haphazard  labor  cost 
of  $400,000,  or  $10,000  each,  but  after  they 
were  completed  and  the  costs  tabulated,  the 
manager  declared  that  if  he  were  given  an- 
other similar  lot,  the  labor  cost  would  not  ex- 


138         EFFICIENCY  AS  A  BASIS  FOR  OPERATION 

ceed  $5,000  each.  Was  the  $200,000  extra  cost 
of  the  first  lot  real  cost,  or  was  it  the  cost 
of  ineflficieiicy  due  to  unstandardized  opera- 
tions? 

A  waiter  bringing  in  an  expensive  dinner 
to  a  gTiest  at  a  hotel  stumbles  and  crashes 
dinner  and  dishes  to  ruin.  Shall  the  guest, 
besides  being  put  to  the  annoyance  of  waiting 
another  half  hour,  be  charged  not  only  dou- 
ble price  for  his  dinner,  but  also  for  the 
broken  dishes,  or  is  the  expense  of  the  acci- 
dent to  be  charged  to  inefficiency,  a  general 
overhead  burden  on  all  dining-room  opera- 
tions, taken  care  of  in  the  standardized  cost 
of  each  dish,  without  reference  to  specific  ac- 
cident? 

There  was  a  railroad  shop  in  which  charges 
were  distributed  with  such  painful  care  that 
the  shop  sweepers  subdivided  their  time  to 
the  various  locomotives  around  which  they 
loitered.  But  locomotives,  as  well  as  men, 
can  loiter,  and  one  of  the  locomotives  stood 
in  this  shop  three  months  waiting  for  a  steel 
deck  plate.  Being  familiar  with  its  number, 
the  workers  charged  all  the  time  they  could 
not  readily  account  for  to  this  locomotive, 
so  that  at  the  end  of  three  months  the  total 
amounted  to  more  than  $5,000.    The  fictitious 


COST   ACCOUXTIXG  139 

accuracy  as  to  the  sweepers'  time  made  more 
glaring  the  gross  falsity  of  the  locomotive 
charge.  In  principle  there  is  no  difference 
between  charging  an  hour  of  wholly  wasted 
time  to  a  locomotive  and  charging  it  with 
two  hours  of  time  when  one  hour  should  have 
accomplished  the  work.  The  moment  specific  .'- 
wastes  of  any  kind  are  charged  to  a  definite 
order  instead  of  being  charged  to  some  inefS- 
ciency  account,  real  costs  are  vitiated. 

Assuming,  under  the  old  method,  an  elabo- 
rately carried  out  cost  system,  there  may  be 
put  up  to  the  superintendent  in  tabulated 
form  comparative  records  covering  many 
thousand  different  operations,  from  one  to 
two  months  after  they  are  completed.  The 
superintendent  does  not  have  any  time  him- 
self to  examine  all  these  diiferent  records, 
so  he  entrusts  the  work  to  a  clerk,  often  with- 
out shop  experience,  instructing  him  to  spec- 
ify those  records  that  require  investigation. 
The  clerk  who  has  learned  to  apply  "the 
method  of  exceptions"  passes  over  as  satis- 
factory those  costs  that  show  slight  change 
from  previous  records,  and  notes  down  for 
action  those  that  show  great  variations.  Be- 
cause costs  are  not  standardized,  the  varia- 
tions due  to  inefficiency  under  identical  con- 


140         EFFICIFA'CY  AS  A  BASIS  FOR  OPERATION' 

ditions  are  in  the  records  either  increased 
or  lessened  by  the  much  larger  variations 
due  to  change  of  conditions.     It  is  evident 
that  a  job  done  one  month  under  100  per 
cent  conditions,  but  with  60  per  cent  labor 
efficiency,  may  equal  in  cost  the  same   job 
done  another  month  under  60  per  cent  condi- 
tions but  100  per  cent  labor  efficiency.     The 
tabulated  costs  of  this  job  show  no  varia- 
tion and  are  consequently  passed  as  satisfac- 
tory, although  in  both  cases  as  to  the  total 
elements  the  expense  is  25  per  cent  too  high. 
In  another  case,  perhaps,  the  clerk  notes  that 
one  month  the  surfacing  of  a  slide  valve  is 
reported  to  have  cost  $37.00  and  in  another 
month  to  have  cost  $3.65.    Having  found,  as 
it  seems  to  him,  a  variation  worth  following 
up,  he  begins  an  interminable  and  irritating 
investigation.    The  foreman  in  whose  depart- 
ment   the    discrepancy    occurred    denies    it, 
claiming  that  the  accounting  department  is 
in  error.    If  the  time  and  cost  accounting  is 
so   accurately  looked   after  that  it  can  be 
demonstrated  that  the  first  order  was  done  by 
an  expensive  man  on  a  big  slow  machine, 
with   a  very  high   hour  rate,  but  that  the 
cheaper  second  order  was  done  by  a  low- 
priced  man,  on  a  small  quick  machine,  with  a 


COST   ACCOUNTING  141 

low  hourly  rate,  then  as  to  this  six-weeks- 
old  occurrence  the  foreman  advances  plausi- 
ble excuses — the  little  suitable  machine  was 
otherwise  employed — the  expensive  man  was 
out  of  work — it  was  in  any  case  an  emergency 
job  and  the  customer  had  to  pay  for  it — so 
the  investigation  results  in  naught  in  the 
way  of  cost  reduction,  but  the  whole  system 
is  discredited,  both  in  the  opinion  of  the  fore- 
man and  of  the  superintendent,  and  the  cost 
clerk  soon  ceases  to  take  more  than  perfunc- 
tory interest  in  his  duties. 

The  human  mind  is  curiously  irrational 
and  perverse.  The  Chinese  are  more  inter- 
ested in  their  ancestors  than  in  their  children, 
and  other  individuals  besides  the  Chinese  are 
more  interested  in  tracing  their  descent  to  the 
1024th  part,  even  on  the  wrong  side  of  the 
blanket,  of  some  rascally  nobleman,  than  in 
training  their  own  children  in  paths  of  right- 
eousness. If  the  object  of  cost  accounting 
is  to  record  fictitious  and  valueless  genealo- 
gies, then  the  old  methods  should  be  given 
God-speed ;  but  if  the  object  of  cost  account- 
ing is  to  record  accurately  present  facts 
and  facilitate  future  improvements,  then  the 
new  method  alone  is  suitable.  The  old  sys- ^" 
teni  of  cost  accounting  is  deficient  firstly,  be- 


142         EFFICIENCY  AS  A  BASIS  FOR  OPERATION 

cause  it  looks  backwards  instead  of  forwards, 
and  it  is  even  more  deficient  because  it  lias 
failed  to  recognize  the  difference  between  ex- 
change and  equivalency.  A  birthright  jnay 
be  sold  for  a  mess  of  pottage.  This  is  ex- 
change without  equivalence.  When  100,000 
bushels  of  wheat  of  certified  grade  are  ex- 
changed for  dollars  at  the  market  quotation, 
there  is  both  exchange  and  equivalence,  the 
operation  being  reversible,  as  the  money  can 
be  immediately  reconverted  into  wheat  with 
only  a  small  frictional  loss.  In  this  operation 
of  exchange  with  equivalence,  the  Govern- 
ment not  only  standardizes  the  dollar,  but  it 
puts  its  stamp  on  the  standard  dollar — the 
grade  of  the  wheat  is  certified  to  by  qualified 
and  approved  inspectors — the  scales  on  which 
wheat  is  weighed  are  inspected  as  to  accu- 
racy. 

It  is,  however,  only  recently  that  Govern- 
ments have  furnished  the  standard  dollars 
now  used  by  exchange.  When  studying 
commercial  practices  at  a  German  commer- 
cial school,  most  of  my  time,  that  might  have 
been  better  employed,  was  wasted  in  learn- 
ing to  value  and  reduce  to  a  common  denomi- 
nator the  various  coins  of  brass,  tin,  copper, 
silver,  gold  and  platinum  which  were  cur- 


COST  ACCOUNTING  143 

rently  used  to  settle  balances.  Before  Na- 
poleon made  a  cleaning  up  in  Germany  tliere 
were  some  three  hundred  independent  States, 
each  with  its  own  rights  of  coinage  and 
money  issue.  Many  of  these  issues  were  still 
current  in  1870,  and  without  an  assay  and 
metal-market  quotations  as  to  value,  there 
was  nothing  definite  in  a  safe  full  of  alleged 
money.  The  thaler  or  gulden  was  indeed 
standardized  at  so  many  grains  of  silver,  but 
many  of  the  current  coins  were  not  thalers 
or  guldens  and  had  first  to  be  reduced  to  tha- 
ler or  gulden  values.  Similarly  today  in  op- 
erating concerns  there  are  many  expressions 
as  "a  day's  work,"  "a  pound  of  material," 
' ' the  performance  of  a  machine" ;  but  exactly 
what  constitutes  a  fair  day's  work,  how  far  a 
pound  of  material  should  go,  and  what  a  ma- 
chine should  do  per  hour,  have  only  in  a  few 
cases  been  determined.  They  should  be  pre- 
determined in  all  cases. 

The  modern  method  of  cost  accounting  an-  r' 
ticipates  standard  expenses  because  it  first 
determines  equivalency  between  dollars  spent 
and  standard  service./  In  the  mining  of  pre- 
cious metals,  as  also  in  the  German  banker's 
assay  of  the  strange  coins  he  handled,  there 
has  always  been  this  determination  of  equiv- 


144         EFFICIENCY  AS  A  BASIS  FOR  OPERATION 

alency.  An  ounce  of  pure  gold  is  worth 
$20.67 ;  an  ounce  of  alloyed  and  impure  gold 
is  worth  $20.67  multiplied  by  an  efficiency  fig- 
ure which  may  be  anything  from  99.99  per 
cent  down  to  a  fraction  of  1  per  cent.  What- 
ever the  mixture,  whatever  the  ore  or  coins, 
sample  and  assay  determine  the  value  per 
ounce,  thus  determining  the  efficiency  coeffi- 
cient. As  in  mining  and  in  former  coin  as- 
says, so  also  in  modern  cost  accounting  there 
must  be  initial  determination  of  equivalency, 
standard  equivalency  consisting,  for  dollars 
paid  out,  of  actual  costs  multiplied  by  cur- 
rent coefficient  of  efficiency.  In  present  com- 
mercial transactions  the  old-time  slugs  and 
base  coins  of  every  kind,  country,  and  date 
have  been  eliminated.  Dollars,  francs,  sov- 
ereigns, and  marks,  all  definitely  and  pre- 
cisely related  to  one  another,  constitute  the 
common  standards  of  the  commercial  world, 
but  in  industrial  equivalency  we  are  still  in 
the  dark  ages. 

It  is  the  function  of  the  efficiency  engineer : 
1. — To  give  the  industrial  and  operating 
world  standards  as  definite  as  the  dollar, 
franc,  sovereign,  or  mark,  for  all  services, 
materials,  or  equipment  operations. 
^2. — To  make  assays,  as  definite  and  relia- 


COST   ACCOUNTING  14o 

ble  as  the  assayer's  determination  of  bullion 
values,  of  all  current  operations,  thus  estal)- 
lishing  current  efficiency. 
^  3. — To  provide  remedies  wliicli  will  bring 
current  efficiency  (often,  one  might  say  usu- 
ally, only  50  per  cent  of  what  it  should  be) 
up  to  100  per  cent. 

It  is  the  function  of  the  comptroller,  audi- 
tor, accountant,  to  locate  and  record  all  ex- 
penditures, to  locate  and  record  all  receipts. 

Both  comptroller  or  auditor  and  efficiency 
engineer  are  staff  officers,  the  work  of  each 
of  whom  is  supplementary  to  that  of  the 
other,  and  both  together  supply  the  line  of- 
ficers with  the  tools  and  the  methods  needed 
to  carry  on  operations  with  exact  knowledge 
as  to  cost  and  efficiency. 

Because  efficiency  is  the  most  important 
item  in  modern  costs,  the  modern  comptrol- 
ler and  the  efficiency  engineer  must  affiliate, 
associate,  so  that  they  may  jointly  solve  the 
problem,  the  efficiency  engineer  being  de- 
prived of  his  most  powerful  instrument  of 
determination  and  betterment  if  the  comp- 
troller does  not  supply  him  with  the  neces- 
sary current  and  correct  records  which  he 
needs.  The  effect  of  association  of  comp- 
troller and  efficiency  engineer  on  costs  will 


146         EFFICIENCY  AS  A  BASIS  FOR  OPERATION 

be  illustrated  for  a  specific  case  of  railroad 
operation,  any  other  possible  case  being  ca- 
pable of  similar  solution,  the  illustration  be- 
ing used,  not  to  show  the  results  of  efficiency, 
but  to  show  how  the  auditor  and  the  efficiency 
engineer,  before  any  current  work  is  begun, 
can  predetermine  standard  costs  and  cur- 
rent efficiency,  ultimately  making  the  latter 
100  per  cent. 

It  is  evident,  when  the  efficiency  engineer 
predetermines  standard  costs,  that  the  dif- 
ference between  standard  costs  and  actual 
costs  is  the  value  of  the  loss  due  to  ineffi- 
ciency. It  is  also  evident  that  if  by  assays 
the  efficiency  engineer  ascertains  current 
wastes,  he  is  able  to  determine  standard  costs 
by  deducting  the  wastes  from  actual  costs. 

When  standard  costs  are  adopted  the  effi- 
ciency engineer  is  pledged  to  supply  methods 
which  will  eliminate  the  wasteful  difference 
between  standard  and  actual  costs,  and  from 
time  to  time,  as  this  work  of  elimination  pro- 
gresses, standard  costs  will  themselves  be  re- 
vised, sometimes  upwards,  sometimes  down- 
wards, since  the  basic  elements  of  costs,  ma- 
terials, services,  and  operations  are  not  con- 
stant in  value. 

A  certain  railroad  operates  1,000  locomo- 


COST   ACCOUNTING  147 

tives.  Test  questions  put  by  bankers,  invest- 
ors, officials,  are:  What  is  the  cost  of  loco- 
motive repairs  per  mile?  What  should  be  the 
cost  of  locomotive  repairs  per  mile?  The 
auditor  answers  the  first  question,  the  effi- 
ciency engineer  answers  the  second  question ; 
and  only  where  they  have  worked  in  har- 
mony are  the  two  answers  the  same.  The 
staff  officer  in  charge  of  the  accounts,  what- 
ever his  title — comptroller,  general  auditor 
or  vice-president — carries  his  organization 
as  to  methods  of  accounting  and  checking 
down  to  the  minutest  details.  The  efficiency 
engineer's  work  runs  parallel  with  the  audi- 
tor's from  top  to  bottom,  but  on  a  wholly 
different  line,  much  as  telegraph  lines  run 
parallel  to  railroad  lines,  each  having  rela- 
tions to  the  same  operation,  train  movement, 
at  every  station.  In  accounting  the  auditor 
is  responsible  for  correct  cost  statements  as 
to  every  item  of  expense,  and  the  efficiency 
engineer  is  responsible  for  correct  cost  at- 
tainments— namely,  100  per  cent  efficiency, 
as  to  every  service,  material  issue,  or  equip- 
ment operation. 

As  a  preliminary  to  cooperation,  the  effi- 
ciency engineer  learns  that  the  mileage  of 
locomotives  is  approximately  known,  because 


148         EFFICIENCY  AS  A  BASIS  FOR  OPERATION 

engineers  and  firemen  are  paid  on  the  mile- 
age basis,  and  that  the  total  annual  mileage 
for  the  1,000  locomotives  is  30,000,000  miles ; 
that  under  the  Interstate  Commerce  provi- 
sions, all  costs  of  labor  and  material  for  loco- 
motive  repairs   have  been  charged  to  one 
given  account  whose  total  for  the  previous 
fiscal  year  was  $3,000,000.     This  works  out 
to  a  mile  cost  for  repairs  of  $0.10.    The  effi- 
ciency   engineer    then  goes  over  the  road, 
makes  numerous  assay  tests  of  service,  of 
material  used,  of  equipment  operation,  and 
while  there  is  great  variation  in  individual 
assays,  some  running  as  low  as  5  per  cent 
and  others  as  high  as  100  per  cent,  it  is  his 
opinion  that  the  assays  of  the  road  as  to  this 
account  show  60  per  cent  of  the  standard; 
that  costs  are  therefore  67  per  cent  higher 
than  they  ought  to  be.    The  accountant  tliere- 
upon  divides  his  estimate  for  the  coming  year 
into  two  parts  and  adopts   (on  the  recom- 
mendation of  the  efficiency  engineer)  $0.06  as 
standard  average  repair  cost  per  mile,  and 
he  adopts  60  per  cent  as  the  current  efficiency 
factor,    carrying   the    remaining    charge    of 
$0.04  to  a  preventable  waste  account.    Until 
further  notice  any  average  repair  expense 
above  $0.06  is  considered  preventable  loss. 


COST   ACCOT'NTIXG  140 

It  is  the  business  of  tlie  efficiency  engineer 
to  eliminate  wastes,  and  it  is  the  business  of 
the  auditor  to  carry  the  accounts  in  such  a 
manner  as  to  record  the  results  of  the  efforts 
of  the  efficiency  engineer.  The  initial  60  per 
cent  efficiency  should  gradually  increase  to 
100  per  cent  and  the  auditor  is  to  record  the 
increase.  The  president  of  the  company  is 
advised  by  the  auditor  that  repair  costs  as 
standardized  by  the  efficiency  engineer  are 
$0.06  per  mile,  and  that  preventable  losses 
amount  to  $0.04  per  mile.  The  proportion- 
ate loss  due  to  inefficiency  is  40  per  cent,  and 
if  current  yearly  mileage  is  to  be  36,000,000 
miles  (on  basis  of  current  wastes)  the  loss 
will  be  $1,440,000,  which  loss,  if  his  original 
assay  is  correct,  it  is  the  task  of  the  efficiency 
engineer  attaining  100  per  cent  to  eliminate, 
just  as  certainly  as  the  Century  Limited  can 
make  the  Chicago-New  York  run  in  18  hours. 

The  president  need  not  look  deeper  than 
the  standard  of  $0.06  per  average  mile,  and 
the  efficiency  for  the  total  account  of  60  per 
cent.  The  standard  will  not  be  changed  for 
a  year — although  ultimately  it  might  be  made 
$0,055  or  even  $0.05,  standards  being  wholly 
distinct  from  efficiency — but  from  month  to 
month  the  president  will  watch  the  efficiency 


150         EFFICIENCY  AS  A  BASIS  FOR  OPERATION 

factor  and  expect  to  see  it  rise  from  the  ini- 
tial 60  per  cent  to  a  final  100  per  cent,  actual 
costs  per  mile  correspondingly  dropping 
from  $0.10  to  $0.06.  It  is,  however,  not  the 
cost  per  mile  Init  the  efficiency  which  is  im- 
portant. A  severe  winter  might  occur, 
greatly  adding  to  repair  costs ;  a  round-house 
might  burn  down  and  damage  many  locomo- 
tives. If  all  the  necessary  repairs  are  made 
at  100  per  cent  efficiency,  officers  and  share- 
holders will  have  to  be  content,  even  though 
the  standard  cost  has  to  be  advanced,  after 
all  consideration  and  for  sufficient  reason,  to 
$0.10  a  mile.  On  the  other  hand,  extraordi- 
narily favorable  conditions  may  drive  the  ac- 
tual costs  down  to  $0.05,  but  if  average  effi- 
ciency in  details  is  only  50  per  cent,  officers 
and  shareholders  know  that  $0.05  is  not  low 
but  twice  what  it  ought  to  be.  In  the  effort 
for  economy  many  railroads  have  been  mak- 
ing records  of  low  cost  which  are  wholly  fic- 
titious, since  necessary  work  has  not  been 
done,  standards  are  not  maintained,  and  in- 
efficiency as  shown  by  the  labor  and  opera- 
tion assay  is  even  greater  than  usual. 

To  attain  100  per  cent  efficiency — $0.06  a 
mile — and  to  record  the  downward  progress 
from  $0.10,  are  respective  duties  of  the  two 


COST   ACCOUNTING  151 

staff  officers,  efficiency  engineer  and  auditor. 
The  latter  meets  the  former's  needs  in  the 
way  of  records  and  accounts.  As  the  largest 
operating  units  are  the  divisions  of  the  road, 
and  as  locomotive  operation  is  about  30  per 
cent  of  the  total  road-operating  expense,  the 
efficiency  engineer  asks  the  auditor  to  subdi- 
vide operations,  all  the  expenses  for  services, 
for  materials,  and  for  equipment  operatior 
(as  to  locomotive  repair  accounts) : 

1. — To  separate  locomotives. 

2. — To  the  respective  divisions. 

3. — To  the  kind  of  work  done,  as  tire  turn- 
ing, flue  welding,  etc. 

From  these  records  it  will  be  possible  to 
tell  not  only  what  each  separate  locomotive 
costs  per  year,  but  also  what  each  class  of 
work  costs.  On  many  roads,  charges  are  al- 
ready subdivided  to  respective  divisions;  on 
others,  even  to  separate  locomotives,  al- 
though not  in  such  a  way  as  to  be  of  any 
practical  use,  but  it  has  not  been  usual  to 
classify  as  to  operations  because  this  has 
hitherto  served  no  purpose  from  an  exclus- 
ively accounting  point  of  view. 

Necessary  records  being  available,  the  effi- 
ciency engineer  investigates  divisions,  shops, 
round-houses,  locomotives,    and    operations. 


152         EFFICIENCY  AS  A  BASIS  FOR  OPERATION 

He  finds  that  shop  conditions  on  one  divi- 
sion are  only  50  per  cent,  on  another  70  per 
cent,  and  lie  forthwith  adopts  such  remedies 
as  will  most  rapidly  bring  np  the  inefficiency 
divisions.  He  may  find,  for  instance,  that 
lighting  and  heating  or  other  elementary 
sanitary  conditions  on  a  division  are  so  poor 
that  the  men,  even  with  best  intentions,  lose 
25  per  cent  of  their  time.  Some  of  this  can 
be  remedied,  often  in  a  surprisingly  easy 
manner,  or  work  can  be  diverted  to  the  more 
efficient  shops.  The  policy  of  concentration 
of  work  at  efficient  points  is  steadily  pursued. 
In  a  given  distance,  a  boiler-shop  punch 
made  by  day  work  at  an  outlying  shop  cost 
for  labor  $6.00,  the  same  punch  made  on  an 
automatic  machine  at  a  central  shop  costing 
for  labor  $0.06. 

When  it  is  stated  that  an  efficiency  engi- 
neer brings  about  improvements  it  is  to  be 
remembered  that  he  is  a  staff  officer — that 
he  merely  provides  standards  for  the  officials 
to  follow — that  he  may  indeed  establish  a 
standard  of  60  per  cent  efficiency  below  which 
no  man  ought  to  be  permanently  retained  in 
the  service  of  the  company,  but  being  a  staff 
officer  he  will  not  directly  discharge  an  em- 
ployee,  although  the  efficiency   standing  is 


COST  ACCOUNTING  153 

only  10  per  cent.  Discharge  is  the  preroga- 
tive of  the  line  officer.  As  a  staff  officer,  the 
accountant  may  report  that  a  given  locomo- 
tive costs  $0.20  a  mile  to  maintain,  while  an- 
other locomotive  on  the  same  kind  of  work 
costs  only  $0.08;  as  a  staff  officer  the  effi- 
ciency engineer  may  report  that  $0.20  a  mile 
is  100  per  cent  performance  while  the  $0.08 
is  only  80  per  cent  performance ;  but  neither 
the  auditor  nor  the  efficiency  engineer  has 
the  right  to  order  the  uneconomical  locomo- 
tive out  of  service. 

High  cost  and  inefficiency  are  not  identical. 
High  cost  may  occur  with  high  efficiency,  low 
cost  may  occur  with  low  efficiency..  The  In- 
dian who  carried  250  pounds  on  his  back 
over  Chilkoot  Pass  in  Alaska  at  the  time  of 
the  Yukon  gold  rush  was  tremendously  effi- 
cient, but  the  method  was  costly,  rates  being 
$0.60  a  pound.  This  is  an  illustration  of 
high  cost  and  high  efficiency.  The  Alaskan 
locomotive  which  today  hauls  freight  over  the 
neighboring  White  Pass  may  be  very  ineffi- 
cient, only  able  to  drag  half  a  normal  load, 
yet  the  rate  is  down  to  $0.02  a  pound.  This 
is  relatively  low  cost  combined  with  low  effi- 
ciency. The  railroads  of  the  United  States 
carry  freight  at  lower  rates  than  any  other 


154         EFFICIENCY  AS  A  BASIS  FOR  OPERATION" 

railroads — cost  of  service  is  relatively  low. 
Many  of  the  operating  and  maintenance 
methods  are  extremely  wasteful,  at  least  51 
per  cent  above  reasonable  standard,  there- 
fore eflficiency  is  very  low,  but  the  low  costs 
of  service  are  not  the  result  of  inefficiency. 

Just  as  the  shops  are  each  separately  in- 
vestigated in  the  pursuance  of  the  work,  so 
the  conditions  as  to  locomotive  operation  are 
investigated  as  to  each  division.  Surprising 
troubles  are  often  revealed.  One  railroad  on 
which  efficiency  work  was  undertaken  had 
neither  turn-tables  nor  round-houses  large 
enough  to  turn  certain  new  locomotives;  on 
another  road  some  of  the  curves  were  so 
sharp  that  decapod  locomotives  could  not 
back  over  them.  In  another  case  the  tracks 
leading  to  the  main  round-house  were  so  eas- 
ily blocked  that  it  was  almost  impossible  to 
move  locomotives  in  or  out.  An  engineer  ex- 
perienced in  detecting  inefficiencies  will  dis- 
cover a  vast  number  of  conditions  that  are 
not  standard,  but  which  can  be  easily  im- 
proved by  the  line  officers,  and  which  when 
improved  will  bring  up  the  efficiency  factor 
of  the  division.  No  divisional  factor  can 
increase  without  bettering  the  system  factor. 
If  for  instance  the  system  factor  is  60  per 


COST  ACCOUNTING  155 

cent,  the  division  one-tenth  of  the  system, 
when  the  divisional  factor  is  advanced  from 
65  per  cent  to  75  per  cent,  the  system  factor 
will  advance  to  Gl  per  cent. 

Records  being  available  for  each  separate 
locomotive,  each  is  investigated  both  as  to 
performance  and  as  to  cost  of  maintenance. 
The  efficiency  engineer  establishes  new  meas- 
ures, new  methods  of  comparison  unknown 
either  to  operating  officials  or  to  accountants. 
He  knows  that  repair  costs  per  locomotive 
mile  are,  from  an  efficiency  point  of  view, 
meaningless.  One  locomotive  weighs  400,- 
000  pounds,  another  only  40,000 ;  one  locomo- 
tive operates  on  3  per  cent  grades,  another  on 
level  track.  He  therefore  uses  such  meas- 
ures as  the  tractive-weight  mile,  which  com- 
pensates for  weight  and  also,  fairly  well,  for 
the  difference  between  freight  and  passen- 
ger locomotives.  He  establishes  a  standard 
allowance  of  $1.00  of  repairs  per  ton  of  coal 
burned,  and  on  the  basis  of  grade  and  service 
he  established  a  standard  of  fuel  allowance. 

The  measuring  appliances  and  methods  of 
the  standard-practice  engineer,  innumerable 
in  their  variety,  are  invented  and  applied  so 
as  to  test  and  gauge  efficiency.  As  to  all  his 
own  measures  he  seeks  the  cooperation  of  the 


156         EFFICIENCY  AS  A  BASIS  FOR  OPERATION" 

accountant,  without  whose  figures  it  is  im- 
possible to  record  definitely  and  reliably  the 
progress  made,  or  the  reverse.  As  a  general 
proposition  those  tabulated  records,  which 
involve,  directly  or  indirectly,  equivalency  in 
money  will  be  maintained  by  the  auditor; 
those  records  which  involve  other  equiva- 
lents, foreign  to  the  auditor's  experience  (as 
pressures  or  temperatures,  or  chemical  an- 
alysis) will  not  be  looked  after  by  him. 

The  measures  and  methods  of  the  efficiency 
engineer  can  be  divided  into  two  main  classes, 
those  that  affect  general  conditions,  and 
those  that  secure  special  results.  General 
conditions  are  those  that  affect  the  good  and 
the  bad  alike,  as  good  equipment,  good  oper- 
ating conditions  and  administration.  Special 
results  are  secured  only  through  high  indi- 
vidual performance,  whether  the  individual  is 
a  person,  a  machine,  a  material  issue,  or  an 
operation  however  complicated.  The  next 
chapter  will  outline  the  specific  methods  and 
records  evolved  and  used  jointly  by  auditing 
and  efficienc}^  engineers  to  locate  and  elimi- 
nate wastes. 


Chapter  VIII 

THE  LOCATION  AXD  ELIMINATION  OF 
WASTES 

ly/T  ODERN  efficiency  cost  accounting  and  i^ 
•^  '^  expense  statements  consider  sepa- 
rately total  expenses,  which  concern  chiefly 
the  comptroller,  standard  or  efficiency  costs, 
which  concern  alone  the  efficiency  engineer, 
and  current  wastes,  which  concern  both  comp- 
troller and  efficiency  engineer.  Total  ex- 
penses need  no  definition.  Efficiency  costs 
are  predetermined  costs.  It  is  part  of  the 
duty  of  an  efficiency  engineer  to  loredeter- 
mine  standard  costs  either  by  using  existing 
standards  or  by  a  series  of  assays. 

Current  wastes  are  predetermined  by  as- 
suming that  they  will  be  relatively  of  the 
same  percentage  as  for  an  immediately  pre- 
ceding period.  The  period  may  be  either 
short  or  long — a  week,  a  month,  a  quarter,  a 
year,  or  a  longer  term.  The  more  rapidly 
changes  occur,  the  shorter  should  be  the 
157 


158         EFFICIENCY  AS  A  BASIS  FOR  OPERATION 

term,  but  when  operations  are  well  standard- 
ized and  standards  regularly  attained  the 
term  may  be  longer.  Total  costs  are  based 
on  two  predetermined  items,  standard  costs 
and  current  percentage  of  waste. 

Standard  costs  are  the  mariner's  compass 
of  a  business  enterprise,  showing  as  the}'  do 
from  month  to  month  the  proper  course  of 
the  business  ship.  Predetermined  total  costs, 
which  include  prevailing  waste,  are  knowl- 
edge of  the  latitude  and  longitude  of  the  loca- 
tion of  the  ship.  Predetermined  costs,  al- 
though of  immense  practical  value,  are  sub- 
ject to  one  slight  disadvantage,  more  theo- 
retical than  actual,  which  nevertheless  may 
prejudice  adherents  of  the  old  school  against 
the  new  methods.  The  drawback  is  that  pre- 
determined total  costs  do  not  agree  with 
actual  expenses  over  the  same  period.  Let 
it  be  remembered,  however,  that  this  lack 
of  agreement  is  no  more  important  than  is 
the  lack  of  agreement  (except  at  two  mo- 
ments of  the  year)  between  sidereal  time  and 
sun  time,  the  lack  of  agreement  between 
standard  railroad  time  and  local  clock  time, 
the  non-agreement  between  magnetic  north 
and  true  north,  the  non-agreement  of  the 
Pole  Star  with  the  true  north,  or  the  non- 


ELIMINATION     OF     WASTES  159 

existence  of  any  constant  true  north,  since 
even  the  axis  of  the  earth  wabbles. 

The  efficiency  engineer  uses  statements  of 
standard  costs,  of  current  wastes,  and  of  pre- 
determined total  costs.  Without  them  he  is 
in  the  position  of  a  driver  who  is  trying  to 
develop  a  trotting  horse  without  the  advan- 
tage of  a  measured  course  or  of  a  time-piece. 
The  driver  would  accomplish  something,  he 
might  indeed  force  the  horse  to  the  limit,  but 
he  would  never  know  whether  he  really  had 
the  best  horse,  or  whether  some  change  of 
harness,  shoes,  sulky,  or  track  was  a  better- 
ment or  a  detriment.  The  efficiency  engineer 
knows  that  only  by  the  rarest  accident  will 
actual  costs  correspond  with  total  predeter- 
mined costs,  which  are  the  sum  of  standard 
cost  and  previous  waste  percentage.  He 
will  never  attain  exact  correspondence  be- 
tween allotment  and  performance.  The 
comptroller's  problem  is  to  reconcile  the  ac- 
tual expenses,  for  whose  correct  statement  he 
alone  is  responsible,  with  the  valuable  and 
useful  total  predetermined  costs  which  he 
and  the  efficiency  engineer  have  jointly  elabo- 
rated and  accepted;  it  is  also  his  task  either 
to  maintain  for  the  efficiency  engineer,  or  to 
assist  him  in  securing,  records  showing  the 


160         EFFICIENCY  AS  A  BASIS  FOR  OPERATION 

discrepancies  between  predetermined  cost 
and  actual  costs.  He  can  of  course  adjust 
predetermined  costs  to  actual  expenses,  or  lie 
can  adjust  actual  expenses  to  predetermined 
costs.  It  is  more  desirable  to  do  the  latter, 
because  in  no  other  way  is  tlie  attention  of 
all  concerned  continually  called  to  the  impor- 
tant facts  of  standards  and  of  wastes.  A 
railroad  which  reports  locomotive  repair 
costs  of  $0.16  per  mile,  a  fact  whose  impor- 
tance escapes  all  but  a  very  few  experts, 
would  not  be  so  indifferent  to  this  very  great 
waste  if  it  had  to  report  in  the  form  illus- 
trated at  the  top  of  the  next  page: 

DIAGRAM    OF   EFFECT  OF   EFFICIENCY  METHODS 

Miles  run   30,000,000 

Standard  cost  for  repairs  per  mile $0.OG 

Total  standard  cost $1,800,000 

Preventable  waste  and   repair  cost  per 

mile   $0.10 

Total  cost  of  preventable  waste $3,000,000 

Total  actual  expense  per  mile $0.16 

Total   actual  expense $4,800,000 

Efficiency  engineers  have  also  found  to 
their  sorrow  that  unless  predetermined  costs 
are  tied  into  current  costs  by  the  comptroller 
it  is  impossible  to  attain  accuracy  in  their 
statement,    and   there    is    also   no   available 


KLIMIXATION     OF     WASTES  IGl 

proof  to  convince  those  whose  support  is 
essential  that  the  methods  used  are  really 
producing  the  results  promised.  In  scanning 
the  accounts  of  one  firm  the  efficienc}^  engi- 
neer discovered  that  payment  for  a  cow  acci- 
dentally killed  had  been  charged  to  the  tool- 
maintenance  account,  not  for  the  purpose  of 
perpetrating  a  fraud  but  simply  to  close  out 
an  omitted  item.  When  the  tool  account  was 
put  on  standard  allowance,  items  of  tliis  kind 
sought  refuge  elsewhere,  and  the  expenses 
reported  were  those  actually  incurred.  The 
old  ideals  of  close  time  accuracy  in  the  state- 
ment of  costs  are  not  to  be  lightly  disre- 
garded, but  hitherto  they  have  resulted  in 
obscuring  the  importance,  and  causing  the 
neglect,  of  items  more  important  from  the 
profit  and  loss,  from  the  efficiency,  aspect. 
If  a  worker  is  overpaid  through  an  error  in 
his  rate,  if  he  draws  pay  for  a  day  on  which 
he  is  not  present,  there  is  quite  proper  alarm 
and  no  hesitancy  is  shown  in  correcting  the 
error  during  the  next  pay  period;  but  if  the 
same  workman  destroys  valuable  material  or 
continuously  kills  time,  no  one  except  per- 
haps his  foreman  takes  any  cognizance  of  the 
resulting  loss,  which  in  the  aggregate  prob- 
ablv  exceeds  a  thousandfold  the  loss  due  to 


162         EFFICIENCY  AS  A  BASIS  FOR  OPERATION 

accounting  carelessness.  Inaccuracies  in 
money  should  not  receive  less  attention  than 
hitherto,  but  efficiency  losses  should  receive 
more.  If  a  slight  time  inaccuracy  in  expense 
statement  results  in  very  great  efficiency  and 
other  gain,  knowing  full  well  what  the  inaccu- 
racy is,  its  amount,  and  why  it  has  occurred, 
we  can  accept  it  just  as  we  accept  the  mag- 
netic compass  or  the  pole  star  as  preferable 
to  the  imaginary  true  north,  or  standardized 
sidereal  time  as  preferable  to  the  practically 
impossible  sun  time.  There  is  the  great  gain 
in  continuous  efficiency  statement,  in  antici- 
pation of  all  cost  records,  so  that  the  cost  of 
any  particular  operation,  however  extensive 
or  minute,  is  known  in  advance  with  greater 
real  accuracy  as  to  single  items  than  in  the 
system  of  accidental  costs,  and  with  very 
sniall  inaccuracy  as  to  the  total  aggregated 
expenses  of  a  year.  To  illustrate  by  a  con- 
crete example :  It  is  better  for  a  monthly  or 
yearly  report  to  state  that  total  predeter- 
mined costs  for  repairs  to  locomotive  per 
mile  traveled  are  $0.07  when  in  reality  they 
are  $0.0696,  than  to  state  them  accurately  as 
$0,101,  when  no  one  lias  any  idea  how  to  re- 
duce them. 

Tlio  double  prol)lem   and  its   solution  by 


ELIMIXATIOX     OP     WASTI-S  163 

comptroller  and  by  efificiency  engineer  will 
be  shown  by  an  actual  practical  example.  On 
a  great  railroad  system  current  actual  costs 
of  one  of  the  items  of  locomotive  repair  were 
about  ^$0.10  per  unit.  A  reduction  of  this 
account  was  planned  in  June,  1904.  It  was 
definitely  ascertained  from  the  official  rec- 
ords : 

1. — That  actual  expenses  for  the  preceding 
year  had  been  $487,171. 

2. — That  actual  expenses  per  unit  were 
$0.1031. 

It  was  definitely  stated  by  the  efficiency 
engineers : 

1. — That  standard  costs  per  unit  should  not 
exceed  $0.06. 

2. — That  current  losses  and  wastes  per  unit 
were  at  least  $0.04. 

3. — That  on  the  basis  of  same  volume  of 
business,  actual  expenses  should  be  reduced 
to  $287,000. 

4. — That  the  actual  annual  saving  should 
be  $200,000. 

The  double  problem  was  to  eliminate  the 
inefficiency  costs  which  amounted  to  40  per 
cent  of  the  whole  expenses,  and  to  reconcile 
predetermined  costs  with  actual  costs.  The 
tables  on  page  in7  illustrate  the  progress  of 


iGi       i:fficiexcy  as  a  basis  for  operation 

tlie  work  from  year  to  year,  although  actu- 
ally the  corrections  should  be  made  and 
standards  revised  from  month  to  month,  thus 
minimizing  differences. 

In  the  year  1903-4,  before  efficiency  work 
was  begun,  the  actual  costs  were  $487,171, 
but  predetermined  on  a  basis  of  $0.10  they 
would  have  been  $472,500.  The  difference 
between  these  two  amounts  could  be  either 
cleared  at  the  end  of  the  fiscal  year,  or  pref- 
erably from  the  efficiency  standpoint,  carried 
in  the  statement  of  the  lapsed  year  1903-4  to 
''Accounts  Eeceivable"  or  to  "Advances  on 
Work  not  yet  Performed"  or  to  some  other 
suitable  caption ;  but  at  the  beginning  of  the 
ensuing  fiscal  year  the  amount  is  charged 
immediately  or  in  monthly  instalments  to  the 
maintenance  account  under  consideration. 
If  this  is  done,  in  the  year  1904-5  the  prede- 
termined expenses  appear  as  $478,540,  but  ac- 
tually amount  to  $486,620  expended  through 
the  year,  to  which  must  be  added  the  item  of 
$14,671  brought  forward  as  a  charge  from 
the  preceding  year.  The  deficit  of  $22,751  at 
the  end  of  this  year  is  closed  out  as  before 
and  is  carried  as  an  initial  charge  into  the 
year  1905-6.  For  1905-6  the  standard  cost  is 
continued  at  $0.06  l)ut,  owing  to  the  improv3- 


F.r.TMTNATIOX     OF     WASTES  l')-) 

meiits  already  effected,  wastes  are  predeter- 
mined at  $0.01,  making  a  total  allotted  cost  of 
$0.07  per  unit.  This  totals  to  $404,320  but  ac- 
tual expenses  are  only  $376,106,  or  $28,214 
less  than  the  predetermination.  The  deficit 
at  the  beginning  of  the  year  was  $22,751, 
from  which  we  subtract  tlie  credit  of  $28,214, 
leaving  a  credit  of  $5,463  to  be  carried  into 
the  year  1906-7.  For  this  year  the  standard 
cost  was  reduced  from  $0.06  to  $0.05  per  unit, 
and  no  allowance  being  made  for  wastes, 
which  by  this  time  were  eliminated,  the  pre- 
determination was  also  reduced  to  $0.05.  The 
total  of  predetermined  allowance  was  $323,- 
140,  the  actual  expenses  were  only  $315,844, 
the  credit  being  $7,296;  the  forward  credit 
was  $5,463,  making  a  total  credit  of  $12,759 
which  at  the  end  of  the  year  1905-6  can  be  re- 
ported under  "Accounts  Payable,"  or  "Due 
for  Work  Already  Done,"  or  any  other  way. 
It  is  much  to  have  reduced  the  total  actual 
cost  from  $487,171  to  $315,844,  but  the  real 
results  attained  are  shown  more  clearly  in 
the  unit  cost  statements.  Not  only  was  a 
standard  of  $0.06,  40  per  cent  lower  than  cur- 
rent practice,  adopted,  but  in  the  fourth  year 
the  standard  was  revised  and  a  new  standard 
of  $0.05  adopted,  which  was  more  than  at- 


166       EFFiciEiSrcy  as  a  basis  for  operation 

tained  in  the  following  year.  Not  only  was 
a  waste  of  $0.04  predetermined,  but  a  waste 
of  $0,052  per  unit  was  actually  eliminated. 
The  unit  expense  was  reduced  more  tlian  one- 
half  and  the  end  of  improvement  was  not  yet 
reached.  In  the  fiscal  year  1907-8  a  unit  cost 
of  $0.0452  was  attained,  total  actual  expenses 
being  $290,832 ;  and  in  the  calendar  year  1908 
the  unit  expense  sank  to  $0.0373,  the  total 
being  $223,541. 

The  handling  of  this  account  on  an  effi- 
ciency basis  of  predetermined  costs  yielded 
many  other  instructive  experiences.  The  in- 
itial plans  for  reduction  were  made  in  June, 
1904,  but  July,  Augmst  and  part  of  Septem- 
ber were  allowed  to  slip  by  before  work  was 
seriously  taken  up.  By  this  time  the  monthly 
expenses  had  risen  to  45,129,  the  unit  cost 
approximating  $0,114.  There  were  no  sub- 
records  of  details  available,  so  that  the  effi- 
ciency staff  did  not  know  where  to  begin  its 
work,  and  the  process  of  betterment  required 
large  initial  outlays  for  better  facilities,  tools 
and  equipment.  The  cost  of  making  up  a 
complete  set  of  sub-records  was  considerable. 
As  a  consequence  the  first  half  of  the  fiscal 
year  1904-5  cost  $256,891,  the  unit  cost  being 
$0.1073,  or  considerably  more  than  the  total 


ELIMIXATION'     OF     WASTES  167 


Pbedetebmined    Costs    and    Actual    Costs    and    Their 
Reconciliation. 


Predetermined  unit 

standard    costs- _ 

$o.or> 

$0.00 

$0.00 

$0.05 

Predetermined  unit 

wastes    

0.04 

0.04 

0.01 

--• 

Predetermined 

total   unit  costs_ 

$0.10 

$0.10 

$0.07 

$0.05 

Actual    unit   costs. 

0.10.11 

0.1017 

0.00.5 

0.049 

Predetermined 

standard    costs 

$283,500 

$287,124 

$340,500 

$323,140 

Predetermined 

wastes    

189,000 

191,410 

57.700 

Predetermined 
total  costs $472,500    $478,540    $404,320    $323,140 

Actual  costs  from 
President's  an- 
nual   report 487,171     480,620      376,106     315.844 


Credit  to  Efficiency 

account     $28,214        $7,296 


Debit  to  Efficiency 

account    $14,671        $8.080 

Credit  carried  from 

preceding  year !f5,403 

Debit  carried  from 

preceding  year $14,671      $22,751  


Credit  to  carry  to 
following    year__  , $5,463     $12,759 


Debit    to    carry    to 

following    year__      $14,071      .i;22,751  _. 


IGS  EFFICIENCY  AS  A   BASIS  FOR  OPERATION 

expense  for  the  whole  year  1908  with  23  per 
cent  more  units.  The  detailed  records  for  each 
month  show  the  tremendous  efforts  made  to 
stem  the  rising  tide  of  waste  during  this  first 
year,  but  the  annnal  record  does  not  show 
this  internal  strnggle.  Possibly  some  will 
claim  that  the  reduction  of  expense  was  not 
due  to  efficiency  standards  and  efficiency 
methods.  Perhaps  not ;  but  the  diagnosis  of 
inefficiency  was  made  before  beginning  any 
work,  standards  of  cost  and  waste  were  es- 
tablished before  beginning  any  work,  a  large 
staff  using  drastic  modern  methods  was  ex- 
ceedingly busy  trying  to  produce  results 
through  e\'ery  means  known  to  efficiency  en- 
gineers, and  where  this  staff  was  most  active 
the  greatest  improvement  was  attained.  On 
a  similar  and  parallel  road,  all  conditions  be- 
ing closely  identical,  except  efficiency  staff, 
actual  costs  hovered  around  the  unit  cost  of 
$0.10. 

A. — Using    Efficiency         R. — Without    Efficiency 
Staff  Organization.  Staff  Organization. 

Unit  Unit 

Year.  Output.  Expense.  Cost.  Output.    Expense.  Cost. 

190.3-4__     --    47,250  .$487,171  !?10..'^,1  51.00.3  .$487,150  $9.55 

1904-5 47.8.54     48G.G20     lO.lG  52.0:'.7     567.101  10.90 

1905-0 57.760     .376.106       6.51  57.0?,4     537.318     9.42 

1906-7 64,628     315.844       4.89  65.076     638,193     9.81 

1907-8 64..326     290,8.32       4..52 

1908    57,777     223,541       3.73 


KLIMIXATIOX     OF     WASTES  169 

In  modern  railroad  operation  an  account 
aggregating  less  than  $500,000  is  not  of  high- 
est importance.  The  example  given  has  been 
selected  to  illustrate  methods  rather  than  the 
results  in  details.  During  the  same  period  on 
the  same  railroad  and  in  wholly  similar  man- 
ner another  account  was  standardized  and 
reduced  as  follows : — 

1904-5.  1905-G.     190G-7. 

Total    units    47.854  57,7G0     (M,G28 

Standard   labor   cost  per  unit__     $30.  $31.35*  $32.10* 

Standard  waste  per  unit 40.  20.  10. 


Predetermined  cost  per  unit $70.00     $51.35  $42.10 

Actual   expenses  per  unit 70.15       48.57     43.32 

As  to  this  account  the  reduction  in  waste 
attained  on  a  unit  basis  amounted  to  $1,731,- 
030.  Smaller  accounts  were  even  more  suc- 
cessfully handled.  In  one  case  the  total  ac- 
tual expenses  dropped  from  $12,000  to  $600 
with  the  same  amount  of  work. 

There  are  five  trunk  railroads  operating 
between  New  York  and  a  western  point. 
Taking  the  locomotive  mileage  as  a  unit,  they 
maintain  their  locomotives  in  repair  approxi- 
mately as  follows : — 

A         B  C         D         E 

Repair  cost  per  locomotive 

mile $0.04  $0.08  $0.10  $0.12  $0.1G 

*  The   weight   of  units   increased. 


170         EFFICIEXCY  AS  A  BASTS  FOR  OPERATION 

Those  intimately  familiar  with  conditions 
on  D  and  E  know  that  locomotives  on  these 
roads  can  be  maintained  in  first-class  repair 
for  $0.06  per  nnit.  Railroad  D  has  a  locomo- 
tive mileage  of  about  20,000,000,  so  that  its 
excess  of  expenses  owing  to  its  inefficiency 
as  to  this  one  item  is  not  less  than  $1,200,000 
per  annum.  Railroad  E  has  a  locomotive 
mileage  of  30,000,000  and  its  excess  of  ex- 
penses owing  to  its  inefficiency  as  to  this  one 
item  is  not  less  than  $3,000,000  per  annum. 
The  total  locomotive  mileage  of  all  the  rail- 
roads in  the  United  States  is  about  200,000,- 
000,  and  a  saving  of  $0.04  per  mile  is  possible 
on  all  but  a  very  few.  Hence  the  total  waste 
per  annum  is  about  $80,000,000,  or  about  the 
same  as  the  total  annual  gold  production  in 
the  United  States — a  waste  and  loss  that  a 
change  from  accounting  by  retrospect  to 
accounting  by  anticipation  would  do  very 
much  to  correct. 

Accountants  will  understand  that  so  vague 
and  unscientific  a  unit  as  "locomotive  mile" 
has  been  used  in  the  above  example  solely  to 
illustrate  a  principle.  The  real  standard  unit 
of  cost  for  any  operation  is  the  cost  per  unit 
of  time,  to  which  in  certain  cases  material 
costs  are  added.     It  costs  so  much  a  year 


ELIMIXATTOX     OF     WASTES  171 

to  operate  an  industrial  plant  or  a  railroad; 
the  year  is  subdivided  into  working  hours 
which  may  vary  in  different  departments. 
Every  ordinary  operation  can  be  reduced  to 
time  at  a  definite  cost  per  hour.  The  effi- 
ciency of  any  man,  any  machine,  any  depart- 
ment, any  shop  or  division,  or  any  plant  or 
railroad,  can  be  determined  by  standard  time 
and  rate  and  the  addition  of  the  wastes 
which  previous  experience  reveals.  The  cost 
of  repairing  a  particular  locomotive  for  a 
particular  mile  run  never  has  been,  never  can 
be,  ascertained,  but  the  rate  of  pay  for  a  man 
for  a  given  hour  and  his  speed  of  work  can 
be  as  definitely  determined  as  the  length  of 
a  race  track  and  the  time  required  by  a  horse 
to  go  around  it.  It  is  absurd  to  standardize 
the  output  of  a  locomotive  plant  at  fifty  loco- 
motives a  month  when  the  standard  labor  on 
one  locomotive  amounts  to  20,000  hours  a 
month  and  on  another  locomotive  to  5,000 
hours.  When,  however,  standard  hours  of 
labor  for  each  item  of  each  locomotive  are 
summed  into  a  total  of  standard  hours  for 
each  type,  then,  if  the  limit  does  not  lie  in 
the  machines,  the  number  of  men  required 
(with  allotted  waste  added)  can  be  prede- 
termined; or,  if  the  limit  of  the  machines  de- 


17-i  EFFICTEXCY  AS   A  BASIS   FOR  OPFRATIOX 

termines  the  number  of  men,  then  the  number 
of  hours  available  fixes  the  volume  of  output, 
which  may  be  high  one  month  at  forty  loco- 
motives and  low  another  month  at  sixty  of  a 
different  type.  Costs  of  locomotives  or  of 
locomotive  miles,  or  of  track  maintenance,  or 
anything  else,  will  take  care  of  themselves 
when  the  unit  hours  of  each  man  and  machine 
are  operating  at  highest  efficiency  for  stand- 
ard cost,  and  there  is  no  other  way  to  save 
millions  of  dollars  than  to  avoid  spending 
dimes  without  equivalency. 

An  American  railroad  running  westward 
from  New  York,  although  under  strictest  in- 
struction to  economize,  spends  per  unit  $0.16, 
a  total  of  $4,800,000,  while  another  railroad, 
with  a  well  deserved  reputation  for  good 
management,  maintains  better  conditions  for 
$0.05  per  unit.  Assuming  tlie  efficiency  of 
this  railroad  as  to  this  item  of  expenditure 
to  be  100  per  cent,  then  the  other  railroad  is 
ojierating  at  31,2  per  cent  efficiency. 
(/  Because  of  the  great  inefficiency  and 
wastes  occurring  in  private  and  corporate 
businesses,  many  assume  that  Grovernment 
management  and  control  would  result  in  less 
waste.  This  is  not  the  case/  Work  of  certain 
kinds    undertaken   by  the    Government,    as 


ELIMINATION     OF     WASTES  -  173 

building  warships,  reclaiming  arid  lands, 
digging  canals,  is  expensive  because  Govern- 
ments do  not  legitimately  exist  for  activities 
of  this  kind,  which  can  be  carried  on  better, 
more  cheaply,  and  expeditiously,  by  private 
or  corporate  endeavor.  The  legitimate  busi- 
ness of  the  Government  is  not  to  compete 
with  individuals  and  corporations,  but  to  sup- 
ply the  staff  knowledge  needed  by  individuals 
and  corporations,  to  develop  gTeat  national 
efficiencies  which  are  beyond  the  power  of  the 
short-lived.  Astronomical  researches,  tide 
and  weather  observations,  geodetic,  coast, 
and  geological  surveys — these  are  some  of 
the  staff  duties  of  a  Government;  sanitary, 
financial  and  other  general  protection  are  the 
cooperative  assistance  we  expect  from  Gov- 
ernment. No  individual  has  the  same  ex- 
tensive and  continuous  opportunity  as  the 
Government  to  sound  the  deep  seas,  to  ma]) 
their  shores,  the  power  to  determine  a  contin- 
uing equivalency  between  a  commodity  and 
money;  but  there  are  thousands  of  individ- 
uals who  know  more  about  digging  dirt  and 
rock  than  does  the  Government,  and  there- 
fore when  the  Government  undertakes  work 
of  this  kind,  tlie  ineffieiencies  revealed  tran- 
scend those  found  in  railroad  shops. 


174         EFFICIEXCY  AS  A  BASIS  FOR  OPERATION 

In  one  of  the  largest  operations  conducted 
by  the  United  States  Government,  the  follow- 
ing assays  were  obtained: — 

Standard  Actual 

Cost.  Waste.  Expense. 

1 $1.95  $29. 6o  $31.60 

2 2.60            13.65  16.25 

3 6.50           39.00  45.50 

4 1.30           14.95  16.25 

5 3.90           35.10  39.00 

6 13.00           85.00  98.00 

Totals   $29.25       $217.35       $246.60 

Efficiency  per  cent,  11.86. 

Assays  of  this  kind  if  numerons,  are  quite 
as  reliable  as  assays  of  ore  on  the  dump. 

With  test  assays  (on  a  very  limited  scale, 
it  is  true)  showing  only  13  per  cent  efficiency, 
is  the  Canal  Commission  with  its  ^ndimited 
inexperience  and  its  «;?  limited  money,  to  be 
put  in  the  same  class  as  the  most  highly  or- 
ganized and  efficient  railroad,  or  in  the  same 
class  as  the  railroad  showing  31.2  per  cent! 

The  distance  from  the  United  States,  the 
novelty  of  the  climatic  and  other  conditions, 
the  absence  of  competition,  the  lack  of  eco- 
nomical incentive,  the  known  absence  of  all 
business  efficiency  standards  in  all  depart- 
ments of  the  United  States  Government,  even 


ELIMINATION     OF     WASTES  175 

at  Washington,  and  with  this  the  failure  to 
em}3loy  any  of  the  modern  methods  of  stand- 
ardized unit  costs  and  their  realization — all 
these  conditions  combined  necessarily  result 
in  the  low  efficiency.  Therefore  the  low  work 
efficiency  attained  for  dollars  spent  is  due  to 
initial  errors  of  judgment  as  to  organization 
and  methods,  errors  necessarily  resulting  in 
incompetencies  of  operation. 

In  comparison  with  standardized  and  at- 
tainable unit  costs,  the  United  States  will 
probably  waste  not  less  than  $180,000,000 
in  building  the  Panama  Canal.  The  esti- 
mated cost  is  $360,000,000,  and  on  a  basis  of 
50  per  cent  efficiency  the  waste  will  be  $180,- 
000,000.  What  is  meant  by  50  per  cent  ef- 
ficiency is  not  that  some  other  type  of  canal 
should  be  built,  or  that  less  dirt  should  be  ex- 
cavated, or  that  sanitation  should  be  cur- 
tailed, but  that  for  the  same  canal,  for  the 
same  volume  and  quality  of  work,  the  ex- 
pense should  be  one-half  of  what  it  is. 

To  assume  that  the  efficiency  will  be  higher 
is  to  assume  that  in  the  first  year  of  this  work 
in  the  Canal  Zone  the  Government  can  show 
a  higher  efficiency  than  that  developed  on  a 
cai-cfully  managed  railroad  at  the  end  of 
forty  years  of  experience. 


Chaptee  IX 
THE  EFFICIENCY  SYSTEM  IN  OPEEATION 

TN  the  preceding  chapter  the  method  of 
-■-  reconciling  predetermined  allotted  costs 
with  actual  expenses  was  outlined  as  to  actu- 
al cases,  in  which  efficiency  methods  reduced 
unit  costs  from  $10.31  to  $3.73  in  four  years 
and  a  half,  in  a  subsidiary  account,  effecting 
a  saving  of  $379,017 — reduced  unit  costs  as  to 
a  main  account  from  $70.15  per  unit  to 
$43.32,  effecting  a  saving  of  $1,731,030. 

Other  instances  were  given  in  which  an 
analysis  of  a  railroad  repair  account  for  a 
single  year  showed  it  to  be  $3,000,000  too 
high,  and  the  Panama  actual  expenses  will 
consist  in  about  $180,000,000  of  standard  unit 
costs  and  in  about  $180,000,000  of  prevent- 
able waste,  the  waste  being  due  to  low  effi- 
ciency in  units. 

The  reduction  of  cost  is  an  efficiencj^  result 
comx:>ared  to  which  the  method  of  stating  it  in 
the  accounts  is  unimportant,  but  the  ability  to 
176 


EFFICIENCY   SYSTEM   IX   OPEltATlUN  177 

follow  efficiency  methods  and  to  convince  oth- 
ers of  their  value  and  effect  depends  largely 
on  clear  and  easily  understood  elements,  and 
these  statements  are  difficult  to  obtain  and  do 
not  carry  Aveight  unless  at  some  point  they 
are  certified  l)y  the  accountants  and  thus  tied 
into  the  official  expense  reports.  Efficiency 
records  and  accounting  records  can  coincide 
only  at  one  point — namely,  where  the  same 
equivalents  are  used.  All  the  expenses  of 
the  year  appertaining  to  a  unit,  divided  by 
all  the  units  for  the  year,  can  be  used  by 
both  efficiency  engineer  and  by  accountant, 
but  in  this  case  no  statement  of  efficiency  and 
expense  will  coincide  for  a  shorter  period  or 
for  a  smaller  number  of  units.  If  at  the  other 
end — the  single  unit  for  the  smallest  time — 
cost-accountant  and  efficiency  engineer  agree 
as  to  a  method  of  stating  cost  for  the  single 
unit  of  work,  then  the  records  built  up  from 
this  base  will  diverge  immediately,  as  effi- 
ciency corrections  are  not  identical  with  ex- 
pense corrections.  It  is,  however,  very  im- 
portant that  both  efficiency  statements  and 
cost  statements  keep  close  together,  that  both 
should  use  the  same  unit,  that  both  should 
use  equivalency  (standard  cost)  and  that  ex- 
pense shall  be  stated  in  two  terms  :    Standard 


178         EFFICIENCY  AS  A  BASIS  FOR  OPERATION 

Cost  and  "Waste.  It  will  prove  convenient  for 
the  accountant  to  standardize  from  previous 
records  both  the  current  percentage  of  waste 
and  the  general  burden  resulting  from  indi- 
rect expense,  rather  than  to  carry  into  the 
daily  operative  expense  statement  the  actual 
but  partly  accidental  waste  and  the  actual 
fluctuating  burden,  especially  as  the  standar- 
dization of  waste  permits  a  very  close  pre- 
statement  of  cost  which  is  always  of  advan- 
tage, and  also  brings  back  forcibly  to  the 
accountant  the  great  purpose  for  which  ac- 
counts were  originally  evolved  and  developed 
— namely,  to  locate  and  eliminate  wastes. 
Whether  efhciency  records  receive  the  assis- 
tance of  accounting  statements  or  not,  the 
methods  of  attaining  efficiency  are  as  fol- 
lows : 

The  volume  of  work  to  be  doije  is  carefully 
measured  or  estimate  1  in  advance  on  a  unit 

basis. 

In  preparing  to  build  a  line  of  railway  to- 
day, the  tons  of  rails,  the  number  of  ties  on 
the  mileage  basis,  the  quantity  of  earth  and 
rock  handled  on  a  cubic-yard  basis,  are  easily 
predetermined.  Predetermination  was  not 
always  resorted  to  in  the  early  days,  and 
there  is  a  storv  current  that  after  the  first 


EFFICIENCY   SYSTEM   I\   Ol'KltATIOX  17!) 

transcontinental  road  was  built  the  number 
of  ties  actually  under  the  rails  was  only  half 
the  number  that  had  been  paid  for.  From 
the  stories  told  me  by  eye-witnesses  of  and 
participants  in  the  methods  of  counting  ties 
delivered,  I  am  surprised  that  the  final  result 
was  so  good.  It  would  have  been  just  as 
easy  to  have  estimated  "ties  required"  in 
advance,  to  have  accepted  no  more  than 
enough,  and  to  have  paid  only  for  those  un- 
der the  track,  in  fact — to  have  counted  first 
and  paid  afterwards — instead  of  paying  first 
and  counting  afterwards.  Similarly  it  is 
possible  as  to  any  o])erating  road  to  estimate 
in  advance  and  in  detail  the  reasonable  unit 
cost  of  each  item  of  repair  and  also  the  rea- 
sonable number  of  each  kind  of  units.  The 
number  of  some  units  may  increase,  owing  to 
unforseeable  causes ;  but  as  units  increase, 
cost  per  unit  should  go  down,  offsetting  to 
some  degree  the  accidental  increase.  When 
a  careful  pre-estimate  is  made  of  the  reason- 
able cost  of  the  great  items  of  operative  cost 
on  a  railroad  it  is  found  that  they  are  not  in- 
frequently less  than  half  the  actual  cost,  and 
I  do  not  know  of  any  important  railroad 
within  the  limits  of  the  United  States  in 
which  the  locomotive  repair  cost  of  $0.06  per 


180         EFFICIENCY  AS  A  BASIS  FOR  OPERATION 

mile  ought  not  to  be  ample,  instead  of  the 
$0.08,  $0.10,  $.12  calmly  embodied  in  annual 
reports. 

The  cost  of  ties  ^or  a  new  railroad  depends 
less  on  the  number  required  than  on  the  cost 
of  each,  since  even  the  grossest  waste  of 
supply  can  scarcely  double  the  quantity;  but 
there  is  almost  no  limit  to  the  amount  which 
corruption  and  similar  carelessness  may  pay 
for  individual  items,  as  was  recently  well 
illustrated  in  the  State  House  furnishing 
scandals  of  Pennsylvania.  So  also  in  manu- 
facturing operation.  While  the  volume  of 
business  has  an  important  bearing  on  cost, 
it  is  distinct  from  the  unit  cost  of  operation, 
which  need  not  be  appreciably  more  for  a 
few  operations  than  for  many.  It  is  the 
methods  used  to  secure  control  of  unit  cost 
which  are  important,  little  known,  and  rarely 
used. 
^  The  cost  of  any  operation  consists  of  four 
items : 

1. — Material  used. 

2. — Labor  service  used. 

3. — Equipment  service  used. 

4. — Indirect  expense,  carried  partly  in  3 
and  partly  as  a  burden  on  all  labor  service 
used. 


EFFICIENCY  sYSTiar  1  v  ()L'i:i;atiox  181 

Item    (1)    is    covered    by    a    "material"    -^ 
requisition. 

Items  2,  3,   and  4  can   be  combined   in   a  ^ 
single  "service"  reqnisilion. 

Two  forms  of  requisition  are  therefore  y 
sufficient  to  cover  every  possible  item  of  op- 
eration expenses,  of  cost,  of  accounting,  and 
of  efficiency,  and,  except  as  to  form,  there  is 
no  difference  between  a  material-expense 
order  and  a  service-expense  order.^- 

The  best  basis  for  a  cost  and  efficiency  sys- 
tem is:  not  to  issue  any  material  without  a 
full  requisition,  not  to  permit  any  work  to  be 
done  without  a  service  order. 

Figures  1  and  2  illustrate  the  two  forms 
of  requisition.  Nearly  all  operating  concerns 
realize  the  importance  of  these  fundamental 
records  which  cover  both  material  and  serv- 
ice, but  the  records  are  usually  curiously  in- 
complete, therefore  largely  without  value  and 
in  consequence  neglected  and  distrustfully 
used.  They  are  supplemented  by  and  ob- 
scured in  a  mass  of  independent  and  confus- 
ing records  and  forms,  which  are  superfluous 
since  all  the  information  is  more  exactly  con- 
tained and  in  more  potentially  available  form 
in  the  original  requisitions.  The  whole  of 
efficient  management  can  flow  from  an  able 


182  EFFICIEXCY  A>^   A   BASIS  FOR  OFEHATIOX 

superintendent  making  joroper  use  of  com- 
plete requisitions.  The  objection  to  full  re- 
quisitions lies  partly  in  the  inherent  objec- 
tion of  almost  everybody  to  exactness  and 
l^recision,  and  partly  in  the  panicky  fear  of 
managers  that  their  use  will  increase  "indi- 
rect expense"  for  clerical  help.  It  is,  how- 
ever, a  fact  that  the  same  amount  of  tabu- 
lated complete  information  will  cost  less,  if 
based  on  and  built  up  from  these  requisitions, 
than  partial  and  incomplete  information  se- 
cured along  independent  lines. 

Industrial  shops  could  well  learn  from 
other  concerns,  as  banks  or  restaurants, 
which  use  similar  requisitions  effectually.  A 
club  restaurant  linds  it  expedient  to  exact 
from  each  guest  a  minute  written  requisition 
in  duplicate,  signed  and  dated,  for  the  meal 
he  orders.  If  the  requisition  is  paid  in  cash 
on  delivery  of  the  supplies  it  becomes  the 
voucher  in  the  cashier's  hands,  but  if  charged 
it  is  carried  to  the  account  of  the  individual 
and  becomes  the  voucher  for  his  bill.  The 
duplicate  goes  to  the  kitchen  and  becomes 
the  kitchen's  record  of  portions  served.  A 
third  copy  should  go  to  the  commissary  de- 
partment, and  there  be  analyzed  and  tabu- 
lated so  as  to  know  and  check  whether  100 


EFFICIENCY   SYSTEM  IX  OPERATION" 


183 


Stores  Issued 
To  Department 


State  Use 
For 


DESCIilPTION 


ACCOCNT  CHAKGE 

Entries  to  be  I  >y  Storekeeper 


QUANXliY 


QUALITY 


TOTAL  VALUE 


Storekeeper  please  issue  above  material 

To. . . 

((iive  ^iame.  Du  not  make  out  to  bearer) 

Approved  by 


Day 


Issued  by 

(Name  of  Plaut) 


(Values  to  be  filled  iu  at  storehouse) 

^ Entries  made  by_ 


Tlie  Engineering  Magazine 


FORM      1.        MATERIAL     REQUISITION.        THE     ORIGINAL     IS     H 
INCHES    WIDE. 

pounds  of  purchased  turkey  resulted  iu  200 
portions  or  in  only  150.  If  a  restaurant  is 
able  to  obtain  original  requisitions  in  this 
manner  in  the  rush  of  the  noon  hour,  without 
expense,  why  can  an  industrial  plant  not  do 
it  also  ?  It  is  obviously  better  for  a  foreman 
to  take  one  minute  and  write  on  a  requisi- 
tion "Give  to  John  Doe  one  lead  pencil  No. 
3,  and  do  not  give  him  another  for  a  mouth," 
than  it  is  to  write  in  30  seconds,  "Give  bearer 
all  the  pencils  he  wants."  The  careless 
method  apparently  saves  30  seconds,  costing 
$0,005  of  the  foreman's  or  the  foreman's 
clerk's  valuable  time,  but  it  results  in  $0.10 
to  $0.20  extra  expense  for  pencils. 


184       efficiexcy  as  a  basis  for  operation 

Material  Eeq,uisition. 

No  material,  whether  lead  pencil  to  clerk, 
or  steamer-load  of  coal  to  power  house, 
should  be  supplied  except  on  requisition,  and 
this  should  state  the  use  to  which  the  material 
is  to  be  put,  and  specify  the  amount,  kind, 
and  quality.  As  every  material  issue  should 
•be  standardized,  the  moment  the  standard  is 
exceeded  (as  for  instance  lead  pencils  to  a 
given  clerk)  reproof  comes  back  to  the  fore- 
man and  to  the  individual  before  the  requisi- 
tion is  twenty-four  hours  old.  It  is  no  more 
legitimate  to  overissue  material,  even  a  lead 
pencil,  without  inquiry,  than  it  is  for  a  bank 
to  pay  an  overdraft  check  without  proper 
consideration  and  authority.  The  material- 
requisition  cards,  containing,  as  they  do,  very 
full  data,  can  be  sorted  and  resorted  in  many 
ways,  being  used  as  checks  on  individuals 
or  on  foremen,  against  departments,  against 
operations  or  against  accounts.  The  use 
made  of  the  requisition  cards  is  a  special 
department  of  management.  The  extreme  of 
simplicity  is  to  charge  the  requisitions 
against  certain  accounts,  then  to  sort  and 
file  them  away  and  use  them  only  for  special 


EFFTCTEXCY   SYSTKiVI    IN'    Ol'KltATIOX  185 

investigations.  If  for  instance  the  question 
is  asked  wliy  there  are  so  many  incandescent 
lamps  purchased,  it  is  immediately  possible 
to  collect  the  requisitions  for  all  Hk'  incan- 
descent lamps  issued  in  each  de])ai-1  incut, 
even  to  each  socket,  and  to  trace  the  exact 
point  of  leak  or  waste — due  rarely  to  the  inev- 
itable,,i>-euerally  to  carelessness  and  sometimes 
to  dishonesty.  The  extreme  of  completeness 
is  to  transfer  by  means  of  perforation  all  the 
requisition  facts  from  the  original  material 
and  service  requisitions  to  a  Hollerith  card, 
to  run  the  Hollerith  sorting  and  tabulating 
machines  at  night,  and  to  present  a  com- 
pleted tabulated  array  of  cost  and  efficiency 
facts  before  operations  begin  the  following 
day. 

WORK  OR  SERVICE-REQUISITION  CARDS. 

These  are  issued  and  used  in  the  same 
manner  as  the  material  cards.  The  cards  cover 
the  whole  of  every  worker's  or  gang's  time  in 
minute  detail,  and  as  to  the  kind  and  volume 
of  work  done  in  equivalency  for  the  time  and 
wages.  The  minutes  and  hours  are  accu- 
rately accounted  for  in  proper  sequence.  All 
the  time  of  every  man  or  gang,  subdivided  to 


18G         EFFICIENCY  AS  A  BASIS  FOR  OPERATION 


SERVICE  CARD 

Workman's  No. 

w 

B 

T 

0 

WurkMittii's  Name                 Dcp't     1            Customer 

Item 

Dulc 

OPiiKATlOil 

ttficienoy 

£stimated 

TIME 

Actual 

Quit 

w 

B 

Time 
Started 

T 

Time 
Elapsed 

1 

Ticket  ^•  umber 

O.K.Foremau 

The  Enjineeriag  Uxjazine  \ 

FORM    2.       SERVICE   RKQUISITION.      THE   ORIGINAL   IS    5   INCHES 
WIDE. 

operations,  being  available,  it  is  easy  to  use 
the  records  in  many  waj^s.  In  practice  the 
original  order  card  or  service  requisition  can 
be  made  out  in  three  or  more  carbon  copies. 
The  original  order  starts  from  the  dispatch- 
ing board,  which  is  prepared  with  spaces  4 
inches  by  10  inches  for  each  man,  machine,  or 
gang  of  men.  The  space  is  large  enough  to 
hold  three  cards  one  above  the  other.  The 
uppermost  space  shows  the  job  on  which 
work  at  the  moment  is  being  done,  the  space 
below  contains  the  cards  of  the  work  to  be 
next  taken  up,  and  the  last  space  contains 
the  amount  of  work  impending  but  not  yet 
ready.      The  dispatcher,    in   charge   of    the 


EFFICIEXC\    SYST1:M    IX   OPi:r!ATIOX  187 

board,  who  may  work  in  conjunction  with  the 
foreman,  sees  to  it  that  the  first  two  spaces 
are  always  i3rovided  with  oi'dcr  cards.  If 
the  two  lower  spaces  .nc  both  bare;  the 
worker  should  be  laid  off,  or  if  lie  is  retained 
in  idleness  his  time  should  be  charged  to  a 
waste  account. 

The  man  who  is  to  do  the  work,  whether 
individual  worker  or  gang  foreman,  obtains 
his  authority  to  begin  from  the  dispatcher, 
in  the  form  of  the  service  card  which  speci- 
fies the  work  expected.  When  the  work  is 
done,  the  service  order  is  returned  to  the  dis- 
patcher, who  notes  on  the  packet  the  time  of 
finishing,  which  coincides  with  the  time  of  be- 
ginning of  the  next  work. 

An  ordinary  clock  with  a  special,  easily 
made  face,  permits  immediate  and  accurate 
reading  of  hours  and  tenths. 

The  efficiency  engineer  or  his  subordinate 
notes  on  every  card,  preferably  before  it  goes 
to  the  worker,  the  standard  time  for  the 
operation,  determined  as  accurately  as  cur- 
rent circumstances  will  permit,  so  that  both 
the  actual  time  and  the  standard  time  become 
part  of  the  record.  A  guess  as  to  standard 
time  is  a  great  advance  over  no  recorded 
statement,  but  a  guess  is  unpardonable,  ex- 


ISS  EFFICIEXCY  .\S   A   BASIS  FOR  OPERATION' 

cept  for  an  emergency,  and  until  reliable 
methods  are  provided.  Whether  first  record 
card  or  carbon  duplicates  are  used,  whether 
the  orio^nal  record  cards  are  transferred  to 
Hollerith  cards,  is  immaterial.  It  is  of  im- 
portance that  every  kind  of  information  and 
/-  efficiency,  as  to  every  man  and  every  part  of 
his  work,  become  available,  and  more  than 
this  is  not  needed  to  show  where  leaks  occur/' 
A  few  of  the  uses  which  the  cards  may  be 
made  to  serve  in  this  regard  will  be  enu- 
mei'ated. 

COST  ACCOUNTING. 

The  card  contains  the  standard  time,  the 
cost  for  standard  time  of  men,  equipment, 
and  department  per  hour,  also  the  operation 
and  the  account  to  which  the  time  is  charged. 
It  also  contains  the  actual  time  and  it  is 
therefore  in  itself  an  efficiency  record.  The 
cost  accountant  can  either  charge  up  the 
standard  cost,  adding  the  current  depart- 
mental percentage  of  inefficiency,  or  he  can 
charge  up  the  standard  cost  and  the  actual 
accidental  waste.  If  the  records  given  him 
are  carbon  duplicates  he  can  file  them  away 
as  vouchers. 


EFFICIENCY   iSYSTEM   IN    OPEUATION  189 


VARIATIONS  IN  STANDARD  SCHEDULES. 

A  schedule  is  the  numbered  description  of 
an  operation.  If  an  operation  is  often  re- 
peated a  schedule  is  formally  and  most  care- 
fully m^de  ont,  but  if  the  operation  is  a 
new  one  or  one  not  likely  to  be  repeated  the 
same  amount  of  care  is  not  taken  to  fix  the 
standard  time,  although  any  inaccurate  esti- 
mates as  to  this  time  are  easily  traced  to  the 
man  who  made  them.  Every  time  a  schedule 
is  put  in  operation  a  carbon  duplicate  of  the 
service  card  is  filed  under  the  head  of  the 
schedule,  and  a  study  of  the  repeated  opera- 
tions of  the  same  schedule  shows  whether  it 
averages  more  or  less  than  standard  time  and 
cost,  whether  the  different  men  take  more  or 
less  time,  whether  the  same  man  takes  more 
or  less  time  on  different  days.  These  varia- 
tions are  a  mine  of  information  for  depart- 
mental improvement. 

The  service  cards  can  be  applied  to  ma- 
chines, locomotives,  etc.,  as  well  as  to  men  or 
materials,  and  when  filled  out  in  the  carbon- 
paper  packet,  give  in  multiple  a  complete 
record  of  the  operation  of  the  equipment, 
showing  the  machine,  its  number,  rate,  the 


190  EFFICIENCY  AS  A  BASIS  FOR  OPEKATION^ 

man  using  it,  the  work  done  on  it,  and  the 
time  taken.  It  is  possible  from  the  records 
to  compare  the  time  and  cost  of  different 
machines  on  the  same  work,  the  total  time 
that  any  machine  is  working.  The  equipment 
specialist  scans  the  records,  and  he  will  not 
be  satisfied  if  a  worker  operates  one  ma- 
chine for  six  hours  at  100  per  cent  efficiency 
and  then  for  four  hours  another  machine  at 
100  per  cent  efficiency.  The  equipment  spe- 
cialist is  concerned  that  one  machine,  owing 
to  idleness  operates  at  60  per  cent  and  the 
other,  for  the  same  cause,  at  only  40  per 
cent.  There  are  many  causes  for  inefficien- 
cies of  this  kind  and  many  available  correc- 
tions. 


Chaptek  X 
STANDARD   TIMES   AND   BONUS 

T  T  is  impossible  to  describe  briefly  all  the 
-*■  methods  to  secure  a  reasonable  standard 
time  for  a  unit  operation,  whether  of  man,  of 
machine,  of  gang,  or  as  to  an  aggregate  group 
of  operations  extending  over  the  whole  plant, 
as  to  the  completion  of  an  order  for  fifty  loco- 
motives or  the  running  of  twenty  trains  a  day 
over  a  road  during  a  month.  "Whether  the 
unit  or  the  aggregate  is  under  consideration, 
the  methods  of  the  analytical  chemist  pre- 
vail; each  detail  is  considered  separately, 
both  as  to  itself  and  in  its  relation  to  pre- 
ceding and  subsequent  details.  Studies  of 
this  kind  reveal  remarkable  inefficiency  in 
usual  operations.  When  all  the  conditions 
were  made  exactly  right,  bricks  have  been 
laid  in  a  rough  wall  at  the  rate  of  twenty  a 
minute,  and  34-inch  rivets  have  been  driven 
with  a  pneumatic  gun  in  structural  iron  work 
also  at  the  rate  of  twenty  a  minute.  Owing 
191 


193  EFFICIEXCY  AS  A  BASIS  TOR  OPERATION 

to  the  perfect  adaptation  of  conditions  the 
operator  found  his  work  no  more  exhausting 
than  the  usual  pace.  This  rate  cannot  be 
maintained  for  a  long  period  because  attend- 
ing conditions  cannot  be  kept  up  to  the  ability 
of  the  man,  but  a  very  high  average  rate  can 
'^  be  maintained  day  in  and  day  out  and  the 
worker  thrive  under  it  both  physically  and 
financially. 

When  the  service  card  is  returned  and  the 
actual  time  noted  on  it  or  on  the  carbon  du- 
plicate, it  is  filed  against  the  worker  and 
makes  any  other  record  of  his  going  or  com- 
ing unnecessary.  In  a  working  month  of  250 
hours  the  cards  will  show  whether  a  worker 
was  present  all  or  only  part  of  the  time — 
thus  determining  the  efficiency  of  presence 
or  availability;  the  summation  of  the  stand- 
ard hours  of  work  delivered  and  the  actual 
hours  taken  during  a  pay  period  shows  the 
efficiency  of  each  man,  while  the  record  of 
each  job  shows  the  efficiency  as  to  every  sepa- 
rate job.  If  the  worker  in  250  hours  delivers 
250  hours  of  standard  work  his  efficiency  is 
100  per  cent ;  if  he  delivers  only  200  standard 
hours  his  efficiency  is  80  per  cent,  and  if  he 
delivers  300  standard  hours  his  efficiency  is 
120  per  cent.      When    records  of  this  kind 


STANDARD    TIMES    AND    BONUS  19!^ 

are  maintained  the  efficient  men  appear  in 
high  relief  and  the  inefficient  appear  all  the 
worse  by  comparison.  If  the  efficient  men  are 
appreciated  and  rewarded  at  their  true  value, 
if  the  inefficient  are  allowed  automatically  to 
eliminate  themselves,  an  esprit  de  corps  is  de- 
veloped that  will  make  the  working  shop 
force  as  active  and  powerful  an  aggregation 
as  a  football  or  baseball  team.  Excellence  is 
not  gauged  by  any  hustle  and  drive  stand- 
ards. 

In  railroad  operation  the  trains  that  pass 
between  distant  terminals  in  the  shortest  time 
are  not  those  that  run  the  fastest  between 
local  stations,  but  they  nevertheless  cost 
less  to  operate,  they  give  less  trouble  to 
the  dispatcher,  they  are  not  as  destructive 
to  motive  power, equipment,  and  roadbed, they 
use  less  coal  and  water,  and  they  earn  gen- 
erally per  mile  run  the  highest  revenue.  Sim- 
ilarly that  shop  works  at  highest  efficiency 
which  gives  continuous  employment  to  steady 
and  efficient  men  and  eliminates  from  its 
force  inefficient  men. 

On  the  opposite  page  an  outline  transcript 
is  given  of  the  individual  and  group  efficiency 
of  ten  shop  men,  the  figures  being  actual  and 
the  results  instructive. 


194         EFFICIENCY  AS  A  BASIS  FOR 

operatio 

N 

Sample  of 

Shop  Efficiency  Record,  November^ 

1907. 

Sum  of    Slim  of 

Standard  Actual    Efficiency 

Bonus 

Name. 

Times.     Times.     Per  Cent.    Per  Cent. 

J.  E.  H.... 

277            199 

139.2 

59.2 

J.  E.  M.... 

236.4         202 

117 

37 

F.  S 

249.9         231 

108.1 

28.1 

B.  A 

247.5         247.5 

100 

20 

C.  S 

184.5         205 

90 

9.91 

E.  H 

155.6         191 

81.4 

4.05 

C.  C 

97.3         137.5 

70.8 

0.37 

J.  M 

143.           214 

66.8 

J.  T 

52.6         168 

31.3 

G.  F 

8.4         112 

7.8 

10  men.  . .  . 

.  .       1,652.2       1,907 

86.6 

hours       hours 

per  cent 

The  efficiency  of  the  -whole  gang  is  86.6  per 
cent  and  this  can  be  considered  the  efficiency 
of  the  foreman.  As  compared  to  100  per  cent, 
the  loss  to  the  shop  is  254.8  hours,  in  this  case 
at  an  average  cost  for  wages  and  burden  of 
$0.78  an  hour,  a  total  loss  in  the  month  of 
$198.74,  for  which  the  foreman  can  be  held 
responsible.  The  elimination  of  the  three 
lowest  men  eliminates  a  loss  of  290  hours, 
amounting  in  value  to  $226.20. 

If  a  man's  wages  are  $0.30  per  hour,  if  in 
the  month  he  has  been  present  240  hours  and 


STANDARD    TIMES    AND    BONUS  195 

lias  delivered  210  hours,  his  efficiency  is  87.5 
per  cent,  his  wages  $72.00,  his  bonus  is  7.94 
per  cent,  its  amount  $5.72.  If  work  is  defect- 
ive and  has  to  be  done  over,  owing-  to  fault  of 
worker,  standard  time  is  credited  but  once 
and  the  efficiency  of  the  man  as  well  of  the 
foreman  diminishes. 

At  100  per  cent  efficiency  20  per  cent  bonus 
is  paid,  and  above  100  per  cent  efficiency  the 
worker  is  given  at  his  standard  rate  all  the 
time  he  saves  in  addition  to  20  per  cent  bonus 
for  the  time  he  works^.  The  bonus  table  is  as 
follows : 


t_,     tD  t^     V2  £.1/2  i_,tO 

^  .  K^i  ^  .  1.1  ^  .  I|  ^  .  a.| 

WcL,  €e-Fi-!;=iH  €^WPh  sShf^lPn   £©■ 

67  .0001  78  .0338  88  .0833  99  .1881 

68  .0001:  79  .0380  89  .0911  100  .20 

69  .0011  80  .0337  90  .0991  101  .21 

70  .0033  81  .0378  91  .107i  103  .22 

71  .0037  83  .0433  92  .1163  103  .23 

72  .0055  83  .0492  93  .1256  105  .25 

73  .0076  84  .0553  94  .1352  110  .30 

74  .0102  85  .0617  95  .1453  120  .40 

75  .0131  86  .0684  96  .1557  130  .50 

76  .0164  87  .0756  97  .1663  135  .55 

77  .0199  87.5  .0794  98  .1770  140  .60 


/ 


196  EFFICIENCY  AS  A  BASIS  FOR  OPERATION 

As  overtime  is  a  very  great  evil,  and  as  no 
man  working  overtime  is  capable  of  attaining 
high  average  efficiency,  the  schedule  is  charged 
with  the  time  paid  for.  The  worker  may  re- 
ceive higher  pay  for  his  overtime,  but  he 
earns  less  premium.  If  he  procrastinates  on 
the  work  he  earns  still  less  premium,  so  that 
he  is  neither  tempted  to  take  overtime  jobs 
nor  to  waste  time  on  them  when  they  come 
to  him. 
/  It  is  preferable  that  standard  times  should 
be  made  public  before  work  is  begun^/that 
changes  in  standard  time,  whether  up  or 
^  down,  should  be  made  on  some  definitely  un- 
derstood and  fair  plan,  and  that  the  amount 
of  reward  for  efficiency  should  also  be  public 
knowledge.  There  are  workers  so  short- 
sighted as  to  think  that  they  can  prevent  a 
determination  of  standard  times,  that  they 
can  prevent  a  determination  of  individual 
efficiency  and  prevent  the  reward  or  promo- 
tion of  efficient  men.  If  the  management  is 
fair,  skilled,  and  wise,  it  is  not  possible  to 
make  effective  opposition  to  propositions 
which  can  be  put  into  force  just  as  powerfully 
without  publicity  as  with  it,  but  secrecy 
harms  the  worker  more  than  it  does  the 
employer.    In  considering  the  gains  due  to 


STANDARD    TIMES    AXD    BONUS  ]9T 

efficiency,  it  is  not  sufficiently  taken  into  ac- 
count by  either  employer  or  employee  that 
net  profits  are  the  difference  between  gross 
earnings  and  expenses,  that  gross  earnings 
could  be  greatly  increased  by  a  growth  of 
the  volume  of  business,  and  that  a  shortening 
of  time  permits  increased  output  without  in- 
crease of  expenses,  therefore  reduces  the  unit 
expense.  If  the  worker  earns  $75.00  per 
month  and  spends  $70.00  his  net  profits  are 
$5.00  per  month — a  discouragingly  small 
sum;  but  if  he  earns  $15.00  in  bonus  his  net 
profits  become  $20.00,  an  increase  of  400  per 
cent.  When  unit  costs  (including  material) 
are  reduced  to  the  manufacturer  even  as  little 
as  10  per  cent  and,  owing  to  standard  time 
and  efficiency,  a  30  per  cent  larger  output  is 
secured,  if  net  profits  were  10  per  cent,  they 
become  24.7  per  cent,  an  increase  in  net  of 
247  per  cent. 

The  bringing  up  of  an  individual  worker 
from  60  per  cent  to  100  per  cent  efficiency  is 
to  his  advantage ;  the  bringing  up  of  a  shop 
from  60  per  cent  to  100  per  cent  is  to  the  ad- 
vantage of  its  owners ;  but  the  bringing  up 
of  all  shops  and  all  operations  in  a  country 
from  60  per  cent  to  100  per  cent  is  to  the  ad- 
vantage of  all  the  people.    > 


198         EFFICIENCY  AS  A  BASIS  FOR  OPERATION 

Constant  reference  has  been  made  to  the 
extra  compensation  paid  to  men  for  high  effi- 
ciency. In  previous  ages  high  individual  or 
collective  efficiency  in  galley  and  other  slaves 
was  secured  through  threats  and  abuse  rather 
than  through  reward.  About  the  middle  of 
the  nineteenth  century  collective  profit  shar- 
ing was  introduced,  it  being  assumed  that  if 
the  workers  were  more  diligent,  net  profits 
would  be  higher,  and  that  the  workers  should 
have  a  part  in  them.  The  connection  between 
hard  individual  work  today  and  a  share  in  a 
hypothetical  profit  months  hence,  dependent 
on  ten-thousand  other  elements  than  the  im- 
mediate individual  effort,  was  too  slight  to  act 
as  incentive  to  a  bright  and  ambitious  man. 

The  next  step,  piece  rates,  went  to  the 
opposite  extreme.  The  whole  responsibility 
was  placed  on  the  individual.  If  he  failed, 
even  if  the  failure  was  due  to  conditions 
over  which  he  had  no  control,  he  did  not  make 
wages ;  if,  owing  to  great  individual  ability 
and  ambition,  he  was  able  to  make  high 
wages,  the  rates  were  cut,  thus  bringing  him 
not  only  down  again  to  his  old  level,  but, 
what  was  worse,  forcing  his  less  skilled  fel- 
low workers  either  below  standard  wages  or 
above  standard  effort. 


STANDARD    TIMES    AND    BONUS  199 

Between  the  extremes  of  vague  and  unre- 
lated profit  sharing  and  the  one-sided  exploi- 
tation of  piece  rates,  many  recent  methods 
have  been  evolved  for  paying  variable  wages 
for  varying  efficiencies. 

One  method  only  will  be  described,  partly 
because  it  is  the  latest ;  partly  because  start- 
ing with  the  principles  of  the  "fair  deal"  and 
never  losing  sight  of  them,  the  method  has 
been  practically,  not  theoretically,  evolved; 
partly  because  it  has  been  tried  and  tested 
on  a  gigantic  scale,  one  corporation  having 
paid  in  1908  over  $600,000  in  premiums  under 
this  plan ;  j^artly  because  this  plan  is  of  uni- 
versal flexibility,  applying  as  well  to  mate- 
rials and  methods  as  to  labor,  applying  to 
each  working  individual,  from  shop  appren- 
tice to  corporation  president,  applying 
equally  to  a  single  operation,  to  any  number 
of  operations  for  any  period,  to  any  num- 
ber of  men  on  the  same  or  on  different  op- 
erations. 

The  method  has  been  called  the  "Indi- 
vidual Effort  System,"  the  name  originally 
given  to  it  when  first  introduced  in  the  shops 
of  the  Santa  Fe  Railway;  it  has  also  been 
called  the  "Santa  Fe  Bonus  System"  because 
of  its  wide  use  on  that  road;  but  it  has  also 


200         EFFICIENCY  AS  A  BASIS  FOR  OPERATION 

been  applied  by  other  large  corporations  in 
many  different  kinds  of  work. 

Tbe  method  is  evolved  from  tbe  idea  of 
buying  labor  or  service  on  specification, 
there  being  a  basic  price  with  a  premium  for 
results  superior  to  the  specifications.  There 
is  the  same  reason  for  buying  labor  on  speci- 
fication as  buying  coal  on  specification. 

With  coal  of  various  chemical  composition 
all  selling  in  the  market  at  $4.00  a  ton,  a  con- 
tract can  specify  a  basic  price  of  $4.00,  no 
coal  being  acceptable  of  less  than  9,600 
B.  t.  u.  per  pound,  the  price,  however,  never 
being  less  than  $0,173  per  million  B.  t.  u. 
Under  the  contract,  if  the  coal  analyzes 
14,400,  the  seller  receives  $5.00  a  ton  instead 
of  $4.00,  and  if  the  coal  analyzes  15,552 
B.  t.  u.,  he  receives  $5.40  per  ton,  or  35  per 
cent  more  than  the  current  market  price. 
This  contract  is  advantageous  to  both  seller 
and  buyer,  since  coal  of  15,552  B.  t.  u.  is 
cheaper  at  $5.40  than  coal  of  9,600  B.  t.  u. 
at  $4.00  per  ton.  On  the  other  hand,  to  most 
purchasers,  coal  is  coal,  almost  irrespective 
of  quality,  and  the  miner  of  superior  coal 
cannot  obtain  a  proportionate  price  for  it. 
The  extra  price  paid  for  coal,  better  than 
specification,  is  not  a  gratuity,  a  present,  but 


RTAXDAIIl)    TIMES    AND    BOXUS  201 

a  proper,  agreed  upon  equivalent  for  supe- 
rior quality,  the  quality  to  be  ascertained  by 
analyses  and  other  tests. 

In  precise  analogy,  time  and  quality  speci- 
fications should  be  predetermined  for  all  la- 
bor and  service  and  a  wage  should  be  speci- 
fied with  a  standard  premium  for  standard 
specifications,  with  equivalent  gain  to  the 
seller  for  the  extra  value  delivered. 

Standard  time  determinations  usually 
show  that  fully  50  per  cent  more  work  can 
be  turned  out  per  machine  and  per  man  if  all 
the  methods,  machines,  and  men  are  toned 
up. 

To  summarize  what  has  preceded,  it  is  evi- 
dent that  one  old  and  two  modern  methods 
will  enhance  efficiency. 

The  old  method  is  still  of  most  impor- 
tance, namely,  a  capable  line  organization, 
a  capable  foreman  in  the  shop.  When  the 
task  begins  to  outgrow  his  ability  personally 
to  manage  it  in  its  many  details,  the  line 
should  be  supplemented  by  staff  assistance, 
and  as  complexity  increases  a  theoretically 
sound  staff  organization  is  quite  as  essential 
as  a  rational  line  organization.  To  solve 
most  of  the  modern  labor  difficulties,  as  well 
as  to  provide  suitable  reward  for  good  line 


S02         EFFICIENCY  AS  A  BASIS  FOR  OPERATION 

administration,  the  method  of  specified  serv- 
ice equivalent  for  a  basic  wage,  with  premium 
payments  for  results  better  than  specifica- 
tion, has  been  evolved. 

Assuming  an  attainable  efficiency  of  100 
per  cent  as  to  all  operations  in  a  shop,  good 
foremanship  alone  cannot  secure  this  result 
— not  because  a  good  foreman  cannot  force 
up  some  single  item  to  100  per  cent  by  giving 
it  a  disproportionate  amount  of  his  time  and 
attention,  but  because  the  moment  his  atten- 
tion is  withdrawn,  efficiency  will  fall  off. 
Therefore  if  a  good  foreman  could  force  a 
shop  up  to  50  per  cent  or  60  per  cent,  he 
would  have  to  be  supplemented  by  staff  assis- 
tance, namely  by  time  keepers,  by  records, 
by  tool  rooms,  etc.,  if  an  efficiency  of  80  per 
cent  is  to  be  reg-ularly  maintained.  An  even 
higher  efficiency  than  80  per  cent  can  be  at- 
tained by  the  combination  of  good  foreman- 
ship  and  good  staff,  if  the  latter  is  made 
large  and  powerful,  but  the  workers  resent 
the  combined  unremitting  endeavor  of  fore- 
man and  staff  to  make  them  deliver  more 
work.  They  are  like  air,  which  when  com- 
pressed heats  up  and  resists.,  This  resis- 
tance, this  back  pressure,  this  heat,  is  re- 
moved by  the  expedient  of  standard  equiva- 


STANDARD    TIMKS    AND    I'.ONUS  203 

lent  in  service  for  wages  paid,  with  cm  in- 
creasing premium  for  service  above  basic 
quality.  It  is  inconceivable  that  a  fruit 
grower  should  refuse  to  accept  a  higher  price 
for  his  first-quality  fruit  than  his  shiftless, 
unskilled  neighbor  asks  for  worm-bitten  nub- 
bins; it  is  inconceivable  that  the  miner  of 
high-grade  ore  or  coal  should  be  content  with 
the  same  price  paid  for  low-grade  ore  or 
coal;  it  is  inconceivable  that  a  Paderewski 
should  give  all  his  concerts  for  the  same  price 
as  is  received  bj^  the  itinerant  street  musi- 
cian ;  and  it  is  equally  inconceivable,  if  the 
fair  deal  prevails,  if  all  receive  when  work- 
ing a  reasonable  basic  wage,  that  those  who 
possess  individual  skill  and  dexterity  shall 
not  be  paid  for  it. 


Chaptee  XI 

WHAT    THE  EFFICIENCY    SYSTEM    MAY 
ACCOMPLISH 

TT  JHEN  we  consider  the  astounding  effi- 
'  '  ciency  of  Nature's  operations  in  mi- 
nute matters — in  insect  and  bird  flight,  in  tlie 
stored  energy  of  the  fish,  in  the  light  of  the 
firefly,  in  the  warmth  of  the  mammal,  in  the 
pervasive  divisibility  of  a  perfume,  in  the 
pumping  power  of  the  sequoia — when  we 
consider  the  wasted  energy  of  the  winds  and 
waves,  the  lavish  waste  of  the  radiant  heat 
of  the  sun  and  the  stars — the  conviction  may 
well  be  forced  upon  us  that  if  we  could  cover 
the  whole  process  and  cycle  we  would  find 
that  these  apparent  wastes  are  regenerative 
and  recuperative  processes,  and  that  the  uni- 
verse will  be  no  nearer  extinction  a  hundred- 
million  years  hence  than  it  was  a  hundred- 
million  years  ago.  Nature  differs  from  the 
individual  in  having  an  unlimited  and  ex- 
204 


WHAT  MAY  BE  ACCOMPLISHED  205 

liaustless  supply  of  time  of  which  it  can 
afford  to  be  lavishly  prodigal.  Because  it 
counts  not  time,  Nature 's  cycle  may  be  wholly 
efficient,  even  as  the  slow  oxidation  of  iron 
may  evolve  as  much  heat  as  the  combustion 
of  thermit;  but  mortals  do  not  have  unlim- 
ited time,  and,  in  their  haste,  they  have  neg- 
lected efficiency  which  may  perhaps  still  be 
destined  to  yield  the  basis  for  a  higher  and 
more  universal  morality  than  that  afforded 
by  either  ancient  religions  or  modern  philoso- 
phies. Certain  it  is  that  the  solution  of  the 
old  problems  seems  easier  when  they  are 
approached  from  this  new  point  of  view. 
Efficiency  is  not  to  be  judged  from  precon- 
ceived standards  of  honesty,  of  morality,  but 
honesty,  morality,  are  joerhaps  to  be  recon- 
sidered and  revised  by  the  help  of  the  funda- 
mentals of  efficiency. 

Efficiency  is  to  be  attained,  not  by  individ- 
ual striving,  but  solely  by  establishing,  from 
all  the  accumulated  and  available  wisdom  of 
the  world,  staff-knowledge  standards  for 
each  act — by  carrying  staff  standards  into 
effect  through  directing  line  organization, 
through  rewards  for  individual  excellence, 
i:>ersuading  the  individual  to  accept  staff 
standards,  to  accept  line  direction  and  con- 


206         EFFICIENCY  AS  A  BASIS  FOR  OPERATION 

trol,  and  under  this  double  guidance  to  do 
his  own  uttermost  best. 

If  we  could  eliminate  all  the  wastes  due  to 
evil,  all  men  would  be  good;  if  we  could 
eliminate  all  the  wastes  due  to  ignorance,  all 
men  would  have  the  benefit  of  supreme  wis- 
dom; if  we  could  eliminate  all  the  wastes  due 
to  laziness  and  misdirected  efforts,  all  men 
would  be  reasonably  and  healthfully  indus- 
trious. It  is  not  impossible  that  through  effi- 
ciency standards,  wiih  efficiency  rewards  and 
penalties,  we  could  in  the  course  of  a  few 
generations  crowd  off  the  spliere  the  ineffi- 
cient and  develop  the  efficient,  thus  produc- 
ing a  nation  of  men  good,  wise,  and  indus- 
trious, thus  giving  to  God  what  is  His,  to 
Caesar  what  is  his,  and  to  the  individual  what 
is  his.  The  attainable  standard  becomes  very 
high,  the  attainment  itself  becomes  very  high, 
and  as  to  all  activities  in  a  nation  ought  to 
be  as  high  as  in  the  traveling  circus,  where 
every  performer,  human  or  animal,  is  a  star, 
whether  bespangled  in  the  ring  or  driving 
tent  stakes,  whether  hauling  wagons  in  work 
clothes  or  in  work  harness.  Let  not  the  ref- 
erence to  the  circus  l)e  considered  a  drop  to 
the  ridiculous,  since  in  efficiency  there  is  no 
2Teat   or   small,   an  1   those  who   have  been 


"WHAT  MAY  BE  ACCOMPLISHED  207 

solving  the  problems  of  aerial  flight  have 
learned  much  from  analyzing  the  flight  of 
obnoxious  gnats,  of  foul  vultures. 

Nature  counts  not  time,  but  there  is  no 
eternity  for  the  individual,  who,  though 
breakfast  and  dinner  were  plentiful,  is  hun- 
gry again  at  supper  time.  There  is  not  an 
eternity  of  time  for  the  corporation  whicli 
may  not  indefinitely  default  on  bond  interest 
without  dissolution;  but  the  State  is  peren- 
nial, and  no  higher  national  efficiency  can 
ever  be  attained  unless  the  State  recognizes 
its  function  in  the  efficiency  problem  and 
takes  over  perennial,  secular  efficiency  as  its 
share  of  the  work.  The  State  has  not  hesi- 
tated in  the  past,  does  not  hesitate  now,  to 
mortgage  the  future  for  the  benefit  of  the 
present,  as  when  it  piles  up  an  enormous 
debt  for  present  luxuries,  forgetting  that 
Martinique,  San  Francisco,  Valparaiso,  Mes- 
sina, are  suddenly  overwhelmed  by  earth- 
quakes and  other  unforeseeable  catastrophies 
which  at  any  moment  occur  and  tax  to  the 
utmost  the  viability  even  of  an  unmortgaged 
community.  The  State  has  not  hesitated  to 
annihilate  the  present  for  the  sake  of  the  fu- 
ture, as  when  it  drafts  its  citizens  into  army 
and  navy  and  slaughters  them  by  the  hun- 


208         EFFICIENCy  AS  A  BASIS  FOR  OPERATION 

dred-thousand  as  in  the  Russo-Japanese  and 
other  wars. 

It  may  be  that  even  as  ruthless  foreign  in- 
vasion and  barbarous  conquest  were  the  bane 
of  antiquity,  destroying  the  irrigation  works 
of  Nineveh,  Babylon,  and  India,  so  mortgage 
debts,  not  less  ruthlessly  although  more 
slowly,  may  destroy  modern  communities  and 
modern  States.  What  would  not  have  hap- 
pened to  England,  weighted  with  her  enor- 
mous Napoleonic  debt,  if  the  steam  railroad, 
if  the  steamboat,  had  not  been  developed  in 
the  first  half  of  the  nineteenth  century,  if 
the  stores  of  Californian  and  Australian  gold 
had  not,  in  a  single  decade,  doubled  Eng- 
land's trade,  thus  halving  the  relative  burden 
of  the  debt? 

Because  the  philosophy  of  efficiency  is  new, 
modern  States  have  failed  to  recognize  the 
chief  modern  justification  for  the  existence  of 
national  government— namely,  furtherance 
of  national  efficiency. 

The  theory  of  the  interrelation  of  indi- 
vidual, corporate,  and  national  duties  as  to 
efficiency  is  as  far  as  possible  removed  from 
the  unnatural  and  unworkable  theories  of 
modern  socialism  which  work  directly  against 
efficiency,  not  for  it,  and  it  is  equally  far  re- 


WHAT   MAY   BE  ACCOMPLISHED  209 

moved  from  the  modern  tlieories  of  State 
control  "which  penalize,  thwart,  and  interfere 
with  efficient  individuals  and  efficient  corpo- 
rations, vaguely  fearing  that  they  are  a  men- 
ace to  the  State,  as  if  the  day,  the  month,  the 
year,  even  the  century  or  seen,  can  never  be 
a  menace  to  eternity. 

The  function  of  the  individual  is  not  to 
drag  down  to  the  level  of  his  own  inefficiency 
the  standards  of  the  corporation,  yet  these 
are  the  avowed  aims  of  modern  socialism,  of 
many  modern  labor  unions ;  the  function  of 
the  corporation  is  not  to  drag  down  to  its 
own  competitive  level  the  standards  of  the 
State,  yet  great  business  men  have  no  higher 
ideal  than  to  apply  corporate  method  to  the 
State. 

The  function  of  the  corporation  is  not  to 
lessen  and  hamper,  but  to  promote,  the  effi- 
ciency of  the  individual  worker,  by  placing  at 
his  disposal  all  the  resources  attainable 
through  the  corporation,  by  directing  his  en- 
deavors and  by  rewarding  him  individually, 
without  limit,  for  efficiency. 

The  function  of  the  State  is  not  to  substi- 
tute itself  for  the  individual  corporation  on 
the  monstrous  supposition  that  all  men  are 
more  efficient  than  the  selected  few,  but  to 


210         EFFICIENCY  AS  A  BASIS  FOR  OPERATION 

take  over  those  secular  efficiencies  which  are 
beyond  the  years  of  the  corporation,  even,  as 
the  corporation  efficiencies  are  beyond  the 
day  needs  of  the  individual.  The  function  of 
the  State  is  to  act  as  statf  guide  and  regu- 
lator to  the  activities  of  the  corporate  line, 
to  use  State  powers  for  the  reward  of  the 
efficient  corporation,  for  the  punishment  of 
the  inefficient  corporation,  even  as  the  corpo- 
ration uses  a  bonus  based  on  efficiency  to 
reward  the  efficient  individual,  uses  penalties 
founded  on  efficiency  records  to  eliminate 
the  inefficient  individual. 

A  certain  marvelously  wise  corporation  in 
New  England  laid  down  as  its  fundamental 
principles  that  it  could  not  expect  reliable 
and  steady  workers  unless  it  guaranteed  per- 
manence of  employment;  that  it  could  not 
expect  workers  above  the  average  unless  it 
offered  them  remuneration  above  the  aver- 
age ;  and  it  therefore  determined  its  prelimi- 
nary piece  rates  not  on  competitive  figures, 
not  on  the  extent  to  which  it  could  squeeze 
down  the  worker,  but  on  the  basis  of  what  a 
desirable  worker  ought  to  earn ;  and,  finding 
these  preliminary  rates  in  many  instances 
higher  than  those  of  its  competitors,  it  re- 
duced them,  not  by  scaling  down  wage  re- 


WHAT  MAY  BE  ACCOMPLISHED  211 

ward  but  by  scaling  up  the  productive  capac- 
ity so  that  unit  costs  fell  as  effort  and  reward 
rose.  Assuming  that  this  firm,  that  other 
great  and  wisel.y  directed  and  managed  con- 
cerns, attain  the  highest  level  of  corporate 
efficiency — what  are  they  to  do  when  competi- 
tors elsewhere  in  the  United  States  employ 
women  and  children  at  starvation  wages  for 
long  hours,  when  necessary  raw  materials 
pay  a  heavy  import  tax,  when  foreign  mar- 
kets are  hampered  by  discriminating  tariffs ; 
what  are  they  to  do  when  raw  materials  fluc- 
tuate in  a  single  year  perhaps  as  much  as 
100  per  cent  in  value;  when  interest  rates 
fluctuate  between  4  per  cent  and  10  per  cent; 
when  demand  for  the  finished  product  flows 
and  ebbs  like  the  tides  in  the  Bay  of  Fundy? 
How  would  the  efficiency  of  such  a  corpora- 
tion not  be  supplemented  and  promoted  if  the 
national.  State,  and  municipal  governments 
were  alive  to  their  obligations  to  study  and 
standardize  conditions — if  the  municipalities, 
States,  and  central  governments  stayed  out 
of  the  market  when  individuals  and  corpora- 
tions were  bidding  it  up,  whether  for  mate- 
rials or  labor;  if  they  came  into  the  market 
with  long  matured  plans  for  unhurried  im- 
provement, to  be  undertaken  when  individ- 


313         EFFICIENCY  AS  A  BASIS  FOR  OPERATION 

uals  and  corporations  were  in  a  period  of 
lull!  Why  should  there  not  be  a  minimum 
wage  at  which  employment  in  national  works, 
reclamation  of  arid  lands,  harbor  dredging, 
canals,  highways,  battleships  and  fortifica- 
tions, would  be  always  open,  thus  doing  away 
forever  with  the  disgrace  of  bread  lines? 
Why  should  a  great  nation  like  the  United 
States  be,  at  any  moment,  scarcely  three 
months  removed  from  famine?  Why  should 
the  national  Government  not  establish 
great  central  reservoirs  of  raw  materials 
even  as  it  establishes  water  catch  basins  to 
accumulate,  in  periods  of  downpour — to  sup- 
ply, during  periods  of  scarcity?  Such  a  pol- 
icy covering  a  dozen  great  staples  of  food,  of 
textiles,  and  of  mining  products  would  finance 
itself  and  be  in  addition  a  source  of  revenue. 
Why  should  the  Government  not  regulate  the 
supply  of  money  and  rates  of  interest,  by 
advancing  freely  and  at  slowly  increasing 
rate  on  finished  articles  of  manufacture  or 
against  great  constructive  works  of  corpora- 
tions, thus  equalizing  production? 

Why  should  the  two  great  locomotive- 
building  plants  of  the  country  be  forced  to 
produce  in  one  year,  6,000  locomotives,  work- 
ing overtime  under  uneconomical  conditions. 


WHAT  MAY   BE  ACCOMPLISHED  213 

employing  50,000  men,  and  the  next  year 
drop  to  a  production  of  2,000,  throwing 
40,000  men  ont  of  work? 

Why  should  the  Government  and  the  States 
and  the  municipalities  not  establish  stand- 
ards of  hours  and  wages  based  on  the  capac- 
ity of  able-bodied  men,  thus  eliminating  the 
necessity  for  either  woman  or  child  labor  in 
factories  ? 

Why  should  a  Dingiey  Bill  increase  the  tar- 
iff on  stockings  and  socks,  under  the  mistaken 
idea  that  the  industry  will  be  transferred  to 
the  United  States — a  purely  protective,  not 
revenue  measure — the  actual  effect  of  the  in- 
crease being  to  stimulate  efficiency  in  Sax- 
ony, to  raise  wages  in  Saxony,  so  that  the 
price  in  the  United  States  does  not  rise,  the 
tariff  becoming  a  revenue,  not  a  protective 
measure?  As  against  silline&s  of  this  kind, 
why  should  the  national  Government  not  use 
the  tariff  and  also  its  own  contracts  as  re- 
wards for  American  efficiency!  Why  should 
it  not  say  to  the  United  States  Steel  Corpo- 
ration, to  the  Standard  Oil  Company,  to  other 
great  corporations:  ''Show  that  you  are 
paying  standard  wages  per  day  for  standard 
hours  per  day  in  your  mines,  in  your  trans- 
portation enterprises,  in  your  plants;  show 


214       ]:FFirii:xcY  as  a  basts  mi;  opi:i:att(3X 

that  from  mines  or  wells  to  finished  product 
you  are  using  the  most  efficient  processes 
known;  show  that  in  all  respects  you  are 
eliminating  needless  waste— and  then  the 
great  power  of  the  tariff  shall  be  used,  not 
only  to  protect,  if  protection  is  required,  but 
to  open  to  you  and  to  extend  foreign  mar- 
kets." 

No  Government  can  ever  rival  in  efficiency 
and  production  a  modern  corporation;  it  is 
folly  for  it  to  try;  but  it  can  stimulate,  pro- 
mote, and  reward  efficient  corporations  even 
as  these  stimulate,  promote,  and  reward  effi- 
cient individuals. 

Let  us  beware  lest  the  exhaustion  of  our 
national  resources,  of  our  forests,  of  our  free 
lands,  of  our  coal  and  iron  mines,  leave  us 
stranded,  out  of  the  running  with  the  older 
nations  of  the  world,  who,  as  Japan  is 
already  doing,  accept  and  apply  the  Gospel 
of  Efficiency. 

The  stimulus  should  come  from  below,  as- 
sistance from  above.  The  automatic  machine 
should  hustle  the  worker  who  tends  it,  the 
locomotive  should  give  its  driver  the  joy  of 
hurtling  over  the  track  at  the  rate  of  seventy 
miles  an  hour,  the  Mauretania  should  carry 
in  four  days  from  shore  to  shore  her  captain 


AVTIAT   ]\rAY   lii:   ACCOiMPLISFIE])  215 

and  engineer  and  all  that  is  entrusted  to 
them.  The  mechanic,  the  engineer,  the  cap- 
tain, shonld  urge  and  demand  from  those 
above  them  best  cutting  tools,  best  grades  of 
materials,  best  track,  best  channels  and  docks. 
Corporations  should  take  up  and  develop  the 
inventions  of  men  like  the  Wright  brothers, 
Governments  should  sustain  and  further,  be- 
yond the  extent  attainable  under  corporate 
power  and  limitations,  the  efficiency  efforts 
of  corporations. 

We  have  not  put  our  trust  in  kings ;  let 
us  not  put  it  in  natural  resources,  but  grasp 
the  truth  that  exhaustless  wealth  lies  in  the 
latent  and  as  yet  undeveloped  capacities  of 
individuals,  of  corporations,  of  States. 

Instead  of  oppression  from  the  top,  en- 
gendering antagonisms  and  strife,  ambitious 
pressure  should  come  from  the  bottom,  guid- 
ance and  assistance  from  the  top. 

The  figure  of  the  thunderbolt  striking 
from  Jove's  clenched  fist  is  not  an  emblem 
that  inspires  the  twentieth  century.  He  was 
a  malignant  and  vicious  interferer  in  the 
affairs  of  mortals.  Let  us  forget  Jove  and 
instead  learn  from  the  seed,  which  aided  by 
soil  and  by  rain,  by  air  and  by  sun,  develop- 
ing what  is  in  it,  doing  its  best,  grows  into 


210         EFFICIENCY  AS  A  BASIS  FOR  OPERATION 

square  miles  of  waving  grain,  or  aspires  up- 
wards into  a  gigantic  sequoia.  Let  each  man 
work  with  the  reliability  of  a  steam  valve, 
yet  with  the  joy  of  a  hunting  dog  and  the 
inspiration  of  the  artist. 

And  then,  when  we  have  attained  to  condi- 
tions such  as  these, 

We  shall  work  for  an  age  at  a  sitting  and  never  be 

tired  at  all ! 
And  only  the  master  shall  praise  lis  and  only  the 

master  shall  blame; 
And  no  one  shall  work  for  money  and  no  one  shall 

work  for  fame. 
But  each  for  the  joy  of  the  working,  and  each  in  his 

separate  star, 
Shall  draw  the  thing  as  he  sees  it,  for  the  God  of 

Things  as  They  Are ! 


H, 


Chapter  XII 

THE    GOSPEL    OF    EFFICIENCY 

Wliat  I  ha'  seen  since  ocean  steam  began 

Leaves  me  no  doot  for  the  machine,  but  what 
about  the  man? 
The  man  that  counts 

np^IIE  human  mind  takes  counsel  of  its 
fears  and  imagines  evils  that  never 
come.  True  efficiency  means  ameliorated  con- 
ditions for  the  worker,  both  individually  and 
collectively — not  only  for  the  worker,  but  also 
for  the  employer — not  only  for  the  employer, 
but  also  for  the  corporation,  and  finally  for 
the  nation. 

The  timid  and  the  doubters  apprehend  that 
increase  in  efficiency  will  result  in  decreased 
employment — an  apprehension  as  old  as 
progress,  that  was  felt  by  the  other  members 
of  the  clan  when  the  first  aspiring  ape  used 
a  stone  instead  of  his  teeth  to  break  a  nut. 
They  feared  he  would  eat  all  the  nuts,  and 
that  they,  the  slower  fellows,  would  go  hun- 
217 


218         EFFICIENCY  AS  A  BASIS  FOR  OPERATIOX 

gry.  This  same  appreheiision  was  felt  on  the 
road  to  the  Yukon  when  the  pack  mule  with 
his  load  of  500  pounds  displaced  the  human 
packer  with  his  hundred  pound  load;  it  was 
felt  when  wagons  hauling  5  tons  supplanted 
the  pack  mules;  and  it  was  felt  again  when 
railroad  cars,  carrying  30  tons,  forever  dis- 
placed the  wagon  trains. 

In  case  of  very  sudden  increase  in  effi- 
ciency, there  is  often  temporary  dislocation 
of  employment,  as  on  the  Yukon  trail,  but 
even  there  were  conditions  changed  as  rap- 
idly in  two  years  as  they  changed  on  the 
passes  between  Italy  and  the  North  in  two 
thousand  years,  there  was  ample  warning, 
and  as  a  result  of  increased  efficiency  there 
has  been  more  business,  not  less,  more  em- 
ployment, not  less. 

Schools  and  colleges  are  not  discounte- 
nanced because  of  the  many  who  enter ;  some 
fall  out  and  fail  to  graduate.  (Those  who 
drop  out  are  often  more  successful  in  life 
than  those  who  stay  in.) 

Where  modern  efficiency  methods  have 
been  tried  on  a  large  scale  the  effect  on  em- 
ployment has  been  carefully  studied.  Before 
efficiency  was  introduced,  about  seven  per 
cent  of  the  employees  dropped  out  voluntar- 


THE    GOSPEL   OF    EFFICIEXCY  219 

ily  each  month,  some  because  they  knew  they 
deserved  better  conditions,  others  for  various 
reasons.  Tl  was  a  constant  difficulty  to  re- 
cruit the  1'(»ic(\  to  bring  it  up  to  its  quota. 
Wlicn  crCicicncy  methods  were  introduced  the 
better  ]iioji  were  induced  to  stay,  inferior  men 
were  not  repkiced,  the  reductions  possible 
from  increased  efficiency  were  brought  about 
without  lay-off  or  discharge  of  any  worker. 
This  was  during  a  period  of  great  activity. 
In  the  following  period  of  great  depression 
a  large  plant,  owing  to  lack  of  orders,  closed 
down  and  all  its  employees  were  out  of  work. 
At  another  plant  in  the  same  city  efficiency 
methods  were  introduced,  as  much  work  was 
made  possible  with  200  men  as  had  before 
been  done  with  400  men,  the  managers  were 
able  to  take  orders  at  the  reduced  costs 
made  possible  by  increased  efficiency,  and  200 
men  were  given  steady  employment  at  higher 
average  compensation.  With  the  return  of 
manufacturing  activity  this  plant  will  double 
its  output,  double  its  present  number  of  men, 
pay  each  worker  more  than  he  received  be- 
fore, yet  lessen  the  cost  of  the  product  to 
the  consumer. 

Efficiency   of   conditions   in  housekeeping 
has  greatly  increased  over  the  United  States. 


220         EFFICIENCY  AS  A  BASIS  FOR  OPERATION 

Hot  and  cold  water,  with  self-draining  bowls, 
sinks,  bath  and  wash  tubs,  steam  heat,  gas 
cooking  stoves,  electric  lights,  and  elevator 
service  have  lessened  work  per  unit  of  output, 
yet  the  wages  of  house  employees  have  stead- 
ily risen. 

The  great  increase  in  farming  efficiency 
has  multiplied  many  fold  the  demand  for 
farm  labor,  not  per  bushel  of  wheat  or  corn, 
but  per  acre  of  ground.  It  is  the  greater 
efficiency  of  cotton  plantations  that  has  held 
and  extended  for  us  the  textile  markets  of 
the  world  against  the  pauper  competition  of 
Africa,  India,  and  South  America.  It  is  the 
efficiently  organized  fruit  production  of  Cali- 
fornia from  orchard  to  can  that  supplies  Ja- 
pan with  American  fruit  products. 

The  increase  in  gold-mining  operation  effi- 
ciency has  swelled  the  yearly  output  of  gold 
from  less  than  $100,000,000  in  1883  to  more 
than  $400,000,000  in  1908,  and  where  one  man 
was  formerly  employed  in  gold  mining,  ten 
now  find  work,  a  larger  and  larger  per  cent 
of  the  extracted  value  going  to  labor.  As  is 
always  the  case,  each  new  ounce  of  money 
metal  stimulated  a  hundred  times  as  much 
new  business. 

Efficiency  is  not  only  not  a  menace  to  those 


THE    GOSPEL    OF    EFFICIENCY  221 

who  sell  their  time  and  skill, butit  is  thebroad- 
est  and  pleasantest  path  of  escape  from  retro- 
i2:ression  and  disaster.  The  efficient  man  will 
have  employment  urged  upon  him  where  the 
inefficient  begs  in  vain;  the  efficient  corpo- 
ration will  be  seeking  workers  when  the  in- 
efficient corporation  closes  its  doors ;  the  effi- 
cient nation  in  the  stress  of  world  competi- 
tion holds  its  own  and  advances,  but  the  in- 
efficient nation  slowly  but  inevitably  loses 
ground. 

The  timid  and  the  s3Tnpathetic  apprehend 
that  the  worker  will  be  driven  to  extreme  ef- 
fort by  the  stimulus  of  a  special  reward,  and 
when  at  the  cost  of  health  he  has  attained  a 
high  specialized  efficiency,  the  extra  reward 
will  be  taken  from  him,  and  being  thrown 
aside  a  nervous  and  physical  wreck,  worn  out 
before  his  time,  his  deluded  successors  for 
the  same  high  output,  will  be  paid  no  more 
than  similar  men  earned  for  much  less  effort 
in  the  past  generation. 

This  is  a  narrow  view  of  the  meaning  of 
efficiency.  It  does  not  consist  in  extreme  ef- 
fort, but  in  the  elimination  of  undesirable 
effort  and  waste  of  all  kinds,  the  elimination 
of  child  and  woman  labor  in  competitive  em- 
ployment.    Efficiency  does  not  come  to  in- 


222         EFFICIENCY  AS  A  BASIS  FOR  OPERATION 

crease  the  nervous  strain  of  the  age,  which 
gives  railroad  spine  to  the  locomotive  engi- 
neer and  results  in  premature  exhaustion  of 
the  telephone  girl,  but  it  comes  to  palliate 
that  strain  by  standardizing  both  effort  and 
reward.  Efficiency  does  not  come  to  perpetu- 
ate the  evil  of  piece  rates  which  does  not 
distinguish  between  (1),  wages  (2),  standard 
times,  and  (3),  individual  efficiency,  but  it 
comes  to  assure  standard  wages  to  each  ac- 
cording to  age,  experience,  and  class  of  work. 
It  comes  to  determine,  justly  and  without 
reference  to  wage  rate,  the  standard  time  of 
any  operation,  and  to  guarantee  to  each 
worker,  whether  low  or  high,  a  special  re- 
ward in  proportion  to  individual  efficiency. 

There  are  and  always  will  be  some  em- 
ployers whose  ideal  of  management  is  to  treat 
unfairly  those  under  them,  but  the  methods 
of  efficiency  will  eliminate  employers  of  this 
kind,  even  more  rapidly  than  they  eliminate 
the  unfit  and  dishonest  worker.  Slave  labor 
was  inefficient,  and  it  has  disappeared;  forced 
labor,  corvee,  has  disappeared  because  it  was 
inefficient,  even  from  Eg->q3t,  where  ;t  flour- 
ished for  5,000  years.  Child  labor  will  be 
curtailed  because  it  is  inefficient. 

Gorky,  the  Russian  writer  who  still  lives, 


THE   GOSPEL   OF    EFFICIENCY  223 

describes  labor  conditions  which  but  a  few 
generations  ago  were  universal  all  over  Eu- 
rope, and  the  desire  to  escape  from  them  has 
peopled  the  United  States. 

There  were  twenty-six  of  us — twentj'-six  living  ma- 
chines shut  up  in  a  damp  cellar,  where  from  morning 
to  evening  we  kneaded  dough  to  make  cakes  and 
biscuits.  The  windows  of  our  cellar  opened  upon  a 
ditch  yawning  open  before  us  and  crammed  full  of 
bricks,  green  with  damp :  The  window-frames  were 
partly  covered  from  the  outside  by  an  iron  grating 
and  the  light  of  the  sun  could  not  reach  us  through 
the  glass  covered  with  flour  dust.  Our  master  called 
us  galley  slave  ;*  and  gave  us  rotten  entrails  for  dinner 
instead  of  butcher's  meat. 

It  was  a  narrow  stuffy  life  we  lived  in  that  stone 
cage  beneath  the  low  heavy  rafters  covered  with  dust 
and  cobwebs.  It  was  a  grievous  evil  life  we  lived, 
within  those  thick  walls,  plastered  over  with  patches 
of  dirt  and  mold.  We  rose  at  five  o'clock  in  the 
morning,  stupid  and  indifferent,  and  the  whole  day, 
from  early  morning  to  ten  o'clock  at  night,  we  sat 
at  the  table  kneading  the  yeasty  dough. 

From  day  to  day  in  tormenting  dust,  in  dirt 
brought  in  by  our  feet  from  the  yard,  in  a  dark, 
malodorous  steaming  vapor,  we  kneaded  dough  and 
made  biscuits,  moistening  them  with  our  sweat,  and 
we  hated  our  work  with  bitter  hatred. 

There  may  be,  in  the  United  States,  here 
and  there,  in  sweat  shops,  in  convict  camps, 
conditions  analogous;  but  similar  industries 
to  this,  the  health  food  companies,  making 


224         EFFICIENCY  AS  A  BASIS  FOR  OPERATION 

soups,  pickles,  biscuits,  breakfast  foods,  are 
running  the  most  efficient  establishments  in 
the  whole  world,  with  welfare  conditions  al- 
most unduly  prominent. 

If  a  modern  efficiency  engineer  should  go 
into  this  Russian  bakery,  his  first  effort 
would  be  directed  to  the  reform  of  the  pro- 
prietor, to  the  closing  up  of  the  cellars,  to 
the  shortening  of  the  hours  of  labor  to  12  to 
10,  to  8;  to  the  substitution  of  machinery 
which  would  make  the  processes  both  easy 
and  sanitary.  Standard  efficiency  effort  al- 
ways first  ameliorates  the  human  conditions. 
Efficiency  is  unattainable  from  overworked, 
underpaid,  brutalized  men.  Race  horses  are 
the  best  cared  for  creatures  on  earth,  not 
from  any  humanitarian  sentimentality,  but 
because  the  best  of  treatment  pays. 

Efficiency  means  that  the  right  thing  is 
done  in  the  right  manner  by  the  right  men 
at  the  right  place  in  the  right  time. 

Whether  we  are  animated  by  selfishness  or 
by  altruism,  the  methods,  the  solution  and  the 
results  are  the  same.  Ideal,  liighest  effi- 
ciency can  be  attained  only  through  a  com- 
bination of  infinite  goodness,  infinite  wisdom, 
and  infinite  power. 

THE  END. 


UNIVERSITY  OF  CALIFORNIA  AT  LOS  ANGELES 

THE  UNIVERSITY  LIBRARY 
This  book  is  DUE  on  the  last  date  stamped  below 

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